China Freight Transport Report Q3 2012

BMI expects continued growth in China''s freight transport sector as it continues to benefit from the
country''s demand for minerals and raw materials, such as coking coal and iron ore. However, while our
demand outlook remains largely positive, we caution that the possibility of a slowdown in Chinese
economic growth is likely to begin in 2012. Our core view on Chinese growth is that we are past the
boom phase and we are entering a period of much weaker expansion, with headline real GDP growth set
to fall to 7.5% by 2013. While not an outright collapse, sub-8.0% growth is a concern.
The main reason we are calling for a sharp slowdown is our belief that the country''s investment boom has
involved a serious misallocation of capital, and as a result is finally set to be unwound in the near term.
Among the recent examples we have seen are the boom and bust of high-speed rail as well as the loss of
momentum in the housing market, which suggest that the boom is coming to an end. This slowdown in
growth will certainly affect demand for the raw materials and minerals shipped on the country''s freight
transport network, leading to a reduction in volumes. We could also see a reduction in investment in the
country''s freight transport network.
Headline Industry Data
􀂃 2012 air freight tonnage is expected to grow by 4.4%.
􀂃 2012 rail freight is forecast to grow by 3.7%.
􀂃 2012 Port of Shanghai throughput is forecast to grow by 2.2%.
􀂃 2012 road freight is forecast to grow by 3.6%.
Key Industry Trends
Qantas Becomes Latest Carrier To Land At Chongqing
Australia''s Qantas is the latest company to launch freighter services to China''s growing air cargo hub in
Chongqing. The carrier is fairly late to the game, with a number of other major air freight operators
having already noted Chongqing''s potential and offering cargo flights to this developing hub. Qantas,
however, already boasts considerable China coverage and Chongqing will be its ninth air freight call in
the country.
China Slowdown View Playing Out At Port Level
BMI highlights that indicators continue to align to back our view of a slowdown in China''s economic
growth, with worries heightened by the negative growth posted by the major export bellwethers.
Container volumes at the ports of Shanghai, Shenzhen and Hong Kong all declined in January 2012.
China Slowdown View Playing Out At Port Level
BMI highlights that indicators continue to align to back our view of a slowdown in China''s economic
growth, with worries heightened by the negative growth posted by the major export bellwethers.
Container volumes at the ports of Shanghai, Shenzhen and Hong Kong all declined in January 2012.
Risks To Outlook
Risks to China''s freight transport sector are primarily to the downside, with our growth projections for all
modes contingent on the strength of the country''s international trade volumes. The increasingly bearish
outlook for the US consumer threatens to dampen the country''s demand for Chinese imports, which will
in turn slow down China''s economic growth. Any slowdown in the Asian country''s economy will result in
a slowdown in Chinese demand for raw material imports, leaving its freight transport sector with
weakened volumes.