Boston, MA -- (ReleaseWire) -- 11/30/2012 -- BMI maintains its broadly positive outlook of the Chilean freight transport sector for Q412. We caution, however, that volume growth is expected to slow, in line with our view that the Chilean economy's robust economic growth is likely to continue cooling in the coming quarters. We believe that declining exports, combined with a moderation of private consumption and gross fixed investment, will weigh on Chile's headline growth in 2012 and put pressure on the country's freight volumes. While we expect the Chilean economy to expand by a solid 4.8% in 2012, we do not believe growth will return to the 5.0% level any time soon. High labour costs, a moderation in external demand and a fiscally conservative government all point to a moderate 4.2% average growth rate over the next five years.
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We see the domestic consumer demand slowing, and this will have a knock-on negative effect on demand for imports of containerised goods, and therefore for freight transport volumes. Chile's external demand story is also likely to weaken and we still believe that import growth will outpace that of exports, putting downside pressure on volumes of dry bulk goods travelling by road and rail, and going through dry bulk terminals. This could be exacerbated if our view for a slowdown in Chinese economic growth plays out. Given the significance of copper exports to Chile's economy, any significant drop in copper export demand - in particular from Asia, which comprises around 65% of demand - or a large correction in copper prices, could push net exports further into negative territory and pose significant downside risk to our freight transport forecasts for the country.
Headline Industry Data
- Air freight tonnage is forecast to rise by 6.4% in 2012 to reach 327,200 tonnes.
- Total tonnes at the Port of Valparaiso forecast to rise 15.5%, to 12.1mn tonnes in 2012, with average growth of 11.8% over the next five years.
- Rail freight tonnage is forecast to rise 3% in 2012, reaching 28.2mn tonnes, with average growth of 1.7% over the next five years.
Key Industry Trends
Lan-Tam Merger Could See Bright Future Ahead
After nearly two years of clearing regulatory hurdles, LAN and TAM merged to form Latam Airlines on June 22. The new airline is the biggest carrier in Latin America and the largest in the world in terms of market capitalisation. BMI believes the airline will be well placed to take advantage of growing volumes in the region.
Port of Valparaiso Launches Tender For Second Terminal
Valparaiso has opened a tender for a second container terminal. Redevelopment plans are under way for the expansion of Terminal 2. The tender process is open until December 20 for a concession of 30 years.
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