We believe that Chile's good macroeconomic outlook, and particularly its strong consumer story, will continue to drive container traffic at its ports. Our positive outlook for the Chilean economy remains in place, and we are upwardly revising our 2011 real GDP growth forecast for Chile to 5.9%, from 5.4% previously, and retaining our 5.0% growth forecast for 2012. We believe the economic expansion will be increasingly underpinned by private consumption and an uptick in fixed investment. A number of leading indicators, including new-cars sales and supermarket sales, suggest that the consumer sector strengthened considerably in 2010, and we expect consumption to grow further in 2011 and 2012 as wealth rises across the country, contributing to robust GDP growth rates, and buoying imports. On the export side, we expect strong Asian demand for Chilean copper to continue.
Headline Industry Data
?? 2011 port of Valparaiso tonnage throughput forecast to grow 16.6%, with average annual growth of 13.7% the next five years.
?? 2011 port of San Antonio tonnage throughput forecast to grow 9% with average annual growth of 8.2% the next five years.
?? 2011 port of Valparaiso 20-foot equivalent unit (TEU) throughput forecast to grow 20.76%, with average annual growth of 16.3% the next five years.
?? 2011 port of San Antonio TEU throughput forecast to grow 11.84%, with average annual growth of 10.4% the next five years.
Key Industry Trends
Port Strike Avoided, Agreement Needed On Competition Laws To Prevent Future Stoppages - BMI believes the cancellation of a planned port strike in Chile is good news for the country's maritime sector, which has been beset by a number of work stoppages so far in 2011. Given its strong consumer story and rich copper reserves, BMI's outlook for Chilean ports remains positive. However, the risk of further strikes presents downside potential to our forecasts.
EBX Consolidates Chilean Supply Chain To Meet Chinese Copper Demand - BMI believes a new port in Northern Chile will be well placed to take advantage of the country's increasing copper output. Copper imports are critical to India and China's economic growth, with both countries suffering from a significant differential between demand and supply for the commodity. As such, BMI expects the new port to see strong volumes, with plenty of traffic to the growing Asian economies.
MSC Partnership Could Bring CSAV's Route Cuts To A Close - Chile's CSAV has cut its fourth route since the beginning of 2011 as it tries to manage the decline in rates on the back of overcapacity in the container shipping sector. However, BMI hopes that the tie up with MSC will enable the carrier to halt its service suspension tactic and allow it to retain its diverse route portfolio.
Risks To Outlook
The main downside risk to our outlook is the possibility that Chile will not be able to improve its port infrastructure in order to keep up with demand. Infrastructure deficits limit expansion. If Chile does not improve efficiency and capacity there is risk that as ports begin to reach the limits of their capacity coming up to 2014 importers will look elsewhere for their supplies.
In previous months we highlighted the risk of the economy overheating, and in line with our view, we believe that policy makers will continue to act to reduce the threat posed to longer-term economic growth, but see downside risks to our positive growth outlook emerging from increased political tensions.
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