Thailand Freight Transport Report Q3 2012

Floods and World Economy Weigh on Forecasts
BMI View: Although BMI thinks Thailand''s post-2011 floods economic recovery is losing steam, we are
still moderately optimistic about the outlook for the country''s ports and shipping sector. We see GDP
growth of 4.0% this year, followed by 4.4% in 2013, which will provide a degree of support for the
industry. Admittedly, foreign trade growth will fall by half in 2012 compared to the preceding year (down
from 11.6% to 5.3% in real terms). But on the plus side we see foreign trade growing at just above that
5% per annum mark for the next few years.
As for industry-specific factors, some of the worst fears about the impact of last year''s floods now seem
to be receding. One of these was that multinational companies active in the Thai manufacturing sector
might conclude that damage to the supply chain was irreparable, and therefore relocate their activities to
areas less exposed to flooding or other natural hazards. Some six months on, however, automobile exports
from Thailand are recovering at a healthy pace.
Headline Industry Data
􀂃 Gross tonnage at Laem Chabang, the country''s largest port, set to rise by 6.8% to 57.23mn
tonnes in 2012 (faster than the estimated 4.1% growth in 2011).
􀂃 At the Port of Bangkok BMI projects tonnage growth will reach 5.8% in 2012 (up from 2.4% in
2011) to 17.81mn tonnes.
􀂃 We now expect the real value of foreign trade to grow 5.25% in 2012, with imports up by 5.5%
and exports marginally behind at 5.0%.
􀂃 2012 air freight tonnage growth forecast at 4.9% and to average 4.4% a year to 2016.
􀂃 2012 rail freight tonnage throughput growth forecast at 7.1% and to average 6.2% a year to
2016.
Key Industry Trends
Air Freight Volume In Positive Territory In 2012
Although there is no comprehensive data for the first months of this year, everything suggests that BMI is
on track with its projection of positive growth. Cargo imports at Bangkok''s Suvarnabhumi Airport
increased year-on-year (y-o-y) in Q112 despite the catastrophic floods of 2011, according to Stewart
Sinclair, managing director of Thai ground handling firm Bangkok Flight Services. We expect air freight
volume to grow aided by the re-opening of Don Mueang airport in Bangkok in April (it was closed late in
2011 because of flood damage).
Thailand Freight Transport Report Q3 2012
© Business Monitor International Ltd Page 6
Precious Shipping Losing Money But Still Buying Boats
Precious Shipping, the largest Thai dry bulk shipping company, posted a net loss of THB40.96mn
(US$1.33mn) for the quarter, down from a net profit of THB108.63m in the same period of 2011. It said
the move into the red was caused by rising running expenses and falling freight rates. Despite slipping
into the red, Precious is continuing with its fleet expansion plans. In February, the company obtained a
credit facility of US$100mn from the Export-Import Bank of Thailand for the acquisition of new or
second-hand dry bulk vessels. We caution, however, that while these strategies are bringing orders at a
difficult time for shipbuilders, owners that continue ordering run the risk of helping to prolong the
ongoing rates depression caused by the current overcapacity in the sector.
Plans For New Port At Pak Bara
Officials have confirmed plans for building a new port at Pak Bara off southern Thailand. The port will
offer initial capacity of 825,000 twenty-foot equivalent units (TEUs) a year, reaching nearly 2.5mn TEUs
by 2032. The proposal is apparently being developed despite a degree of uncertainty over Thai
involvement in the US$4bn development of the Dawei port in neighbouring Myanmar. While Bangkok
has suggested its support for Dawei is cooling, BMI believes this is part of a negotiating strategy to put
pressure on Myanmar''s government to overcome delays and deliver increased power supplies to the
proposed site. Dawei still offers a regional gateway to Laos, Cambodia, Vietnam and southern China. It
has the added benefit of reducing pressure on the Malacca Strait and could complement the further
development of its own Laem Chabang port.
Key Risks To Outlook
The main downside risk to our Thailand freight forecasts continues to come from the uncertain global
economy. Thailand remains exposed to the possibility of a sharper-than-expected slowdown in China, an
increasingly important trade partner. We believe that the threat of an external blow to Thailand''s economy
could still tip the country into a recession.
A second risk appears to be diminishing. This is the ever-present danger of domestic political
confrontation between ''Red Shirts'' (the ruling Puea Thai Party led by Prime Minister Yingluck
Shinawatra) and ''Yellow Shirts'' (the largely urban opposition). Constitutional reform, considered by many
to be a possible trigger for a new clash between the two sides, now has been set back to late 2012, and
there are some signs it will be managed with an eye to minimising political risk.