Boston, MA -- (ReleaseWire) -- 04/10/2014 -- Considerable investment in the expansion of Chile's ports confirms our positive outlook for its ports infrastructure and the wider construction industry. We also maintain our positive outlook for Chile's construction industry on the back of an investor-friendly business environment, political stability, and a strong pipeline of projects. Although we estimate a moderate slowdown in real growth for 2013 and 2014 to 4.7% and 5.6% respectively - compared to 8.1% in 2012 - this still represents a promising outlook. In addition, we expect the Chilean construction industry value to more than double in the next decade, reaching US$51.5bn by the end of our 10-year forecast period to 2023.
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However, we are revising down our 2014 real GDP growth forecast for Chile to 4.2%, from 4.6% previously, as the country's H1 2013 economic performance has reinforced our conviction that lower commodities prices and weakening external demand for industrial metals will weigh on Chile's economy over a multi-year timeframe. This slowdown in growth is attributable to decelerating economic activity in China, which over the next few years will result in weakening real demand for Chilean copper exports and reduced investment into the country's mining sector. This slowdown in demand will have a negative effect on Chile's port and shipping volumes.
Our Asia Country Risk team believes that the likelihood of a rapid and sustained economic downturn in China is rising, posing downside risks to our growth forecast for Chile. Indeed, if Chinese demand for copper, and thus subsequently copper prices, trend lower than we currently forecast, we could see real GDP growth in Chile head well below 4.0%.
This should have a negative knock-on effect on volumes at the country's ports. Further downside risk is presented by a series of strikes that took place in the Chilean ports sector in 2012 and in Q1 2013. Additional strike action could hit port throughput.
Headline Industry Data
- 2014 Port of Valparaiso tonnage throughput forecast to grow 1.7%.
- 2014 Port of San Antonio tonnage throughput forecast to grow 4.2%.
- 2014 Port of Valparaiso twenty-foot equivalent unit (TEU) throughput forecast to grow 2.5%.
- 2014 Port of San Antonio TEU throughput forecast to grow 5.6%.
Key Industry Trends
Port Infrastructure Investments Support Growth Forecast: A US$723mn investment at the port of Valparaiso includes the expansion of Terminal 1 (operated by TPS), the expansion of the South Access junction and construction works in progress in Terminal 2, which was awarded to OHL in April 2013. The investment will double the port's transfer capacity to reach 2mn TEUs per year, as explained by Valparaiso Port General Manager Harald Jaeger. With the capacity to handle two Post-Panamax vessels simultaneously, the extension will make Valparaiso the country's largest port.
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