Iran Freight Transport Report Q2 2010

Ataollah Sadr, managing director of Iran’s Ports and Maritime Organization, said at the end of February 2010 that the country’s ports capacity was expected to reach 158mn tonnes annually in the next five years, compared with an existing 120mn tonnes, reported IRIB. He revealed that nearly 35% of imports and exports have been carried out through domestic ports, the rest through border customs. He added that more than 60% of the import and export activities through domestic ports were being carried out via Shahid Rajaee Port, which is located in southern Hormuzgan province. Shahid Rajaee Port is one of most the significant ports in the Persian Gulf area in terms of container operations. According to Fars news agency in June 2009, as cited by Iran Daily, Shahid Rajaee Port is ranked 60th out of the world’s top 100 ports. It is hoped that the port will become a major transshipment hub for the region.
We now estimate 2009 GDP growth in Iran at 1.6% (no change on our previous quarterly report), and are projecting 2.1% in 2010 (reduced from 3.4% earlier) and 3.4% in 2011 (down from 3.7% previously). Although the trough of the business cycle appears to have been passed, political turmoil in the wake of the disputed June 2009 elections, along with Iran’s international isolation remain downside risks. The forecast for 2010-2014 is for an annual average GDP growth rate of 3.1% per annum. This will represent a slowing of the pace relative to the average of 4.3% achieved in the preceding five-year period 2005- 2009. The effect on our freight-traffic forecasts for the period as a whole is, therefore, negative comparing the next five years with the preceding five. Despite a question mark over Indian involvement, the proposed Iran-Pakistan-India gas pipeline is slowly moving forward, but further delays can be expected and this mega-project will not come onstream until after the end of our five-year forecast period. Political risk will be a factor hanging over all freight modes. We maintain earlier reductions in the pipeline throughput projection, reflecting the impact of growing domestic demand on exports, and insufficient new investment. Because of ongoing restrictions on the supply of US spare parts for Iranian-owned civilian aircraft, we think airfreight growth will still be held back by capacity limitations. Shipping traffic forecasts have been pegged back given the 2008/09 downturn in the global shipping cycle. Taking all these factors into account, our forecasts for freight volume across all modes, measured in millions of tonnes, stands at an annual average of 3.5% in the 2010-2014 period, marginally ahead of the rate of expansion of the economy as a whole. Both rates fall short of the country’s potential.
According to our latest estimates, transport and communications GDP rose by 1.8% in 2009 compared with general economic growth of 1.6%. For the 2010-2014 forecast period, we expect the transport and communications sector to expand marginally faster than GDP, helped along by growth in the communications sub-sector. It will achieve average annual growth of 3.2%, versus 3.1% for overall GDP. The total value of transport and communications GDP will rise to US$33.1bn in nominal terms by 2014, representing 6.8% of Iran’s GDP. Projections based on employment figures compiled for the ILO in 1996 suggest that Iran’s transport and communications sector employed 3.5mn people, or 20.5% of the labour force, in 2008. This seems a rather high proportion to us, compared with other countries.
To gauge the outlook for the freight transport sector up to 2014, BMI has taken note of the country’s longer-term economic and industrial aspirations, as well as the broad macroeconomic environment outlined above. By 2015, Iran aims to export around 25mn tonnes annually of petrochemicals (including olefins, xylenes and methanols) and by 2020 about 35mn tonnes each year of LNG. To achieve these targets (or even get close), the country’s shipping and related freight-transport network capacity will have to increase substantially, and we do not yet see any evidence of that happening at the rate that is required. Road haulage growth has lagged behind GDP in recent years, reflecting the poor quality of the highway network. Our forecast provides for a very gradual catching up process, as overland trade with Iran’s immediate neighbours begins to grow. For 2010-2014, we predict annual average road haulage volume growth of 3.4%. Rail freight has, in contrast, lagged behind the general growth of the Iranian economy, and here we are less optimistic over the ‘catch-up’ potential. Despite much talk of building a new railbased north-south transport corridor linking Iran to its regional neighbours, we take the view that there will be no significant increases in capacity during the forecast period. Rail freight growth will average an unimpressive 1.5% per annum. We are forecasting that maritime freight will grow by an annual average of 6.2%, with a recovery from the recent downturn in world trade. Pipeline throughput, hampered by a lack of investment to cope with growing demand, will grow by 4.0% per annum. The big boost from the proposed pipeline to Pakistan and India will not make itself felt on current plans until after 2014, just at the end of our current forecast period. Airfreight will grow at an annual average of 4.8%, constrained by an ageing aircraft fleet.