China Freight Transport Report Q3 2009

In April, China COSCO, the world's second largest integrated shipping company, revealed plans to reduce capacity on its key dry bulk and container fleet as it struggles to adapt to challenging market conditions (reported by Reuters). BMI notes that the news comes shortly after the group announced its 2008 financial results, showing a 40% fall in profits. A statement released by the company revealed plans to defer delivery of three container vessels, each with a capacity of 8,495 TEUs, until 2010. Reuters notes that COSCO's container fleet comprised 141 vessels as of December 2008, making it the sixth largest in the world. 59 new vessels are reported to be due for delivery by 2013, including nine in 2009 and a further 15 in 2010. Meanwhile, the group is also expected to defer or cancel a proportion of its dry bulk vessel orders, thought to comprise of 58 vessels. This is despite COSCO chairman, Wei Jiafu, voicing his expectations for the dry bulk shipping sector to return to health in April 2009. Jiafu, who oversees the largest dry bulk fleet in the world, (comprising 443 owned or chartered vessels) spoke of an anticipated rise in dry-bulk rates in Q209, driven by the recovery of the Chinese economy. COSCO's chairman said that the situation is 'improving impressively in the second quarter as shipping and leasing costs are trending up'. He added that in April 2009 COSCO had seen a rate increase of about US$150 on individual containers shipped by the company from China to Europe. BMI notes that the group's 2008 financial results, released on April 23 2008, were worse than had been predicted by many industry observers. They showed a 40.4% year-on-year (y-o-y) decrease in profit margin from CNY19.48bn (US$2.85bn) to CNY11.61bn (US$1.7bn).

China's economy continues to grow, albeit at a slower rate, driving trade and demand for freight transport. Our latest estimates put GDP growth at 9% in 2008, easing quite sharply to 5.6% in 2009.

China's foreign trade will dramatically reverse from 21.8% growth in 2008, with a contraction of 10.5% in 2009, before recovering with 16.9% expansion in 2010. Despite this year's pause, the resumption of double-digit trade growth next year will continue to create major demands on the country's transport and infrastructure capacity. Underpinning the optimistic outlook is a supportive operating environment. BMI has given China's freight industry a rating of 64.1 (out of a theoretical maximum of 100), which places it right up at the top of the Asia Pacific region.

Based on available data, we have reduced rail freight and river/ sea cargo growth. Our forecast for freight carried across all modes in 2009-2013 now stands at 8.7% per annum (pa). According to our latest estimates, transport and communications (T&C) GDP rose by 10.8% in 2008, 1.8 %age points (pps) faster than overall GDP, which we estimate will have expanded by 9%. For the 2009-2013 forecast period, we expect the T&C sector to continue outpacing the economy as a whole. It will achieve average annual growth of 8%, versus 7.1% for overall GDP. The total value of T&C GDP will rise to US$393bn in nominal terms by 2013, representing 6.3% of China's GDP. The T&C sector employed 22.28mn people, or 2.7% of the labour force, in 2008. We see the figure rising to 23.4mn by 2013.

Despite current conditions, prospects for the freight transport industry remain encouraging. As our figures indicate, the freight sector will continue to grow at a faster rate than the economy as a whole. This is in line with intensifying demand for transport at this stage in the Chinese economy's development. By transport mode, growth will be led by oil and gas pipelines (at an average rate of 18.7% a year), shipping and inland waterways (9%), road haulage (7.3%), rail freight (also 6.8%), and air freight (6%).

• Executive Summary
• SWOT Analysis
• China's Rail Industry SWOT
• China Political SWOT
• China Economic SWOT
• China Business Environment SWOT
• Freight Transport Business Environment Ratings
• China Logistics Performance Index (LPI)
• Economics - Long-Term Risk
• Politics - Long-Term Risk
• Freight Transport Growth
• Transport Infrastructure Growth
• Regulatory Environment
• Competitive Environment
• Transport Intensity Index
• Political Risk Summary
• Economic Risk Summary
• Business Environment Risk Summary
• Legal Code/Corruption
• Red Tape
• Labour Force
• Industry Trends And Developments
• Road
• Rail
• Air
• Sea
• Pipelines
• Industry Forecast Scenario
• Quarterly Oil Products Price Outlook
• Macroeconomic Environment
• Transport Outlook
• Trade
• Market Overview
• Multi-Modal
• Competitive Landscape: Multi-Modal
• Sinotrans
• Road
• Infrastructure
• Competitive Landscape: Road
• Rail
• Competitive Landscape: Rail
• Air
• Infrastructure
• Competitive Landscape: Aviation
• China Southern Airlines
• Maritime
• Infrastructure
• Competitive Landscape: Maritime
• Pipelines
• Competitive Landscape: Pipelines
• Country Snapshot: China Demographic Data
• Section 1: Population
• Section 2: Education And Healthcare
• Section 3: Labour Market And Spending Power
• BMI Forecast Modelling
• How We Generate Our Industry Forecasts
• Transport Industry
• Sources
• List of Tables
  • Table: Asia Pacific Freight Business Environment Ratings
  • Table: Oil Product Price Assumptions, Q408-Q409 (US$/bbl)
  • Table: Oil Product Price Forecasts, 2006-2013 (US$/bbl)
  • Table: China - Economic Activity, 2006-2013
  • Table: China's Freight Transport Industry, 2006-2013
  • Table: Freight Carried, Domestic And International, 2006-2013 (mn tonnes-km, unless otherwise stated)
  • Table: Value Of Imports By Category, 2006-2013 (US$mn)
  • Table: Value Of Exports By Category, 2006-2013 (US$mn)
  • Table: Sinotrans' Financial Performance, 2008
  • Table: China Southern Airlines' Financial Performance, 2007 And 2008
  • Table: Demographic Indicators, 2005-2030
  • Table: Rural/Urban Breakdown, 2005-2030
  • Table: Education, 2002-2005
  • Table: Vital Statistics, 2005-2030
  • Table: Employment Indicators, 2001-2006
  • Table: Consumer Expenditure, 2000-2012 (US$)
  • Table: Average Annual Manufacturing Wages, 2005-2012