Boston, MA -- (ReleaseWire) -- 12/24/2012 -- BMI View: Well Positioned To Weather Economic Storm As we head into the final quarter of 2012, the largest obstacle looming on the horizon for South Korea's freight industry remains the predicted slowdown in China - Seoul's main export partner by far. Hot on the heels of last August's dismal flash HSBC purchasing managers' index print of 47.8, BMI points to yet another leading indicator, this time from the government itself, which supports our view that China's economy will remain on a deceleratory path in the coming quarters. Meanwhile, demand for electronics in particular has fallen this year and therefore has had a detrimental effect on South Korean exports.
Our less-than-impressive forecasts for the air and rail freight sectors this year highlight the damage of global economic headwinds, with these sectors expected to post y-o-y growth of 2.32% and 1.38% respectively. The maritime sector will, however, continue to provide relief for the foreseeable future, being the out-performer in the freight mix once again, evidenced by the healthy growth forecasts over the mid term for the country's largest ports. The Port of Busan remains South Korea's largest port in terms of tonnage throughput and this facility is set to enjoy the healthiest average annual growth to 2016.
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Following a weak Q212 GDP print that came out recently, a slew of economic data releases in South Korea confirm to us that economic conditions are fast deteriorating and the country is likely to maintain its trajectory of slowing growth ahead, with the prospect of a recession increasing.
Headline Industry Data
- 2012 air freight tonnage throughput forecast to increase 2.32%.
- 2012 rail freight tonnage throughput forecast to grow 1.38%.
- Total trade (imports plus exports) in real terms is set to grow 2.50% in 2012.
- The Port of Busan will see gross tonnage growth increase 4.12% in 2012.
- The Port of Incheon is forecast to see gross tonnage growth of 5.12% in 2012.
Key Industry Trends
Tight Market Creates Boom Times For Rig Sector
The twin factors of persistently high oil prices and new technologies have sparked a flurry of new exploration and production (E&P) activity. At the forefront of these developments, and prime beneficiaries, are the auxiliary services, from oilfield services to specialised shipbuilders and engineering companies. Hyundai Heavy Industries' latest orders, grossing a total of US$600mn, come hot on the heels of other large developments, suggesting a boom is occurring in the offshore ship construction sector.
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