Global shipping continues to suffer from overcapacity caused by vessels that were ordered during the predownturn boom years coming online. With demand still depressed, the three shipping sectors - container and dry and liquid bulk - are all struggling to maintain healthy rates in the face of overcapacity in the global fleet. Indexes are falling and ships are increasingly being forced to operate below break-even rates. Huge geopolitical events, such as the Arab Spring and the Japanese earthquake, have further complicated market dynamics in the shipping sector.
Israel's two primary ports of Haifa and Ashdod are recovering well from the downturn so far, though the Middle Eastern unrest could have an effect on the ports' throughputs. The third port of Eilat is set to grow over the long term with its privatisation moving forward.
Israel's air and rail freight and shipping industry had a strong recovery in 2010 after the global recession in 2008 and 2009. However, BMI expects the strong bounce in 2010 to be followed by more subdued growth in 2011. Air freight had been growing rapidly in the Middle East, but recent events have slowed the region's growth in recent months.
Headline Industry Data
?? 2011 air freight growth is forecast at +5.3% following estimated growth of +10.4% in 2010, and to average 4.3% to 2015.
?? 2011 port of Haifa tonnage throughput growth forecast at +4.06% following an estimated growth of 5.5% in 2010, and to average 4% to 2015.
?? 2011 rail freight tonnes is forecast to grow at +3.8% following an estimated growth of +12.9% in 2010, and to average 3.6% to 2015.
?? 2011 total trade growth in real terms is forecast at +3.8%, and to average 3.8% to 2015.
Key Industry Trends
Chinese Urged To Invest In Israeli Railway
Israeli Prime Minister Benjamin Netanyahu in March 2011 reportedly suggested to a Chinese delegation that their country should join forces with Israel in the construction of the planned railway to Eilat. BMI notes that Chinese imports to Israel have risen hugely over the past decade, so any infrastructure that will grant the Asian dragon faster access to Israel's population centres will be a worthwhile investment. Furthermore, the line could be used as a transit route to Europe, thereby bypassing the Suez Canal in politically unstable Egypt.
Authorities Enter Into Open Skies Agreement
The aviation authorities of Israel and Colombia entered into a bilateral open skies agreement in the week ended April 16 2011. The new agreement will boost air traffic volume between the two countries, and enable the Israeli and Colombian airlines to operate direct flights between Tel Aviv in Israel and Bogota in Colombia. Further, the agreement will also facilitate code-sharing of flights between Colombia and Israel. The agreement will be beneficial for both the countries as it will offer flexibility and facilitate ease of transportation for the countries' passengers. However, the agreement is still required to be approved by the governments of Colombia and Israel.
New Port To Be Built Off Gaza?
In March was reported the possibility that an island port could be constructed off the Gaza Strip, controlled by an international force, in order to facilitate trade for the Palestinian enclave. Yaakov Katz, Israeli trade minister, stated: 'This project aims at a total break with the Gaza Strip, while now Israel continues to be responsible for the trade of this area because we have not permitted the building of a port and airport. I have sought a solution that would allow us to break all ties with Gaza while maintaining our control over maritime security through the blockade, which is critical in blocking arms traffic.'
Key Risks To Outlook
The primary risk to BMI's forecasts for Israel are wider risks to the region as a whole Much of the Middle East is still undergoing political turmoil, including Israel's neighbours (Syria, Egypt, Lebanon). Should this escalate further, and more incidents occur on Israeli borders, there could be detrimental effects on Israeli trade.
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