Iran Freight Transport Report Q3 2009

Container throughput at the Iranian port of Bandar Abbas fell year on year (y-o-y) by 6.8% in May 2009.

The decline is in line with BMI's predictions of a decrease of 6.4% in throughput for the whole of 2009.

In May 2009, the port of Bandar Abbas, which is operated by Tidewater, handled a total of 160,452 twenty-foot equivalent units (TEUs), down from 172,103 TEUs in May 2008. The port's May 2009 throughput did, however, register a month on month (m-o-m) growth of 3.2% from April 2009's throughput figure of 155,410 TEUs. May 2009's y-o-y decline is line with the port's container volumes for 2009 so far. Throughput at the port for January 1 2009 - May 31 2009 stands at 777,585 TEUs, a y-oy container throughput fall of 6.58% from the same period's throughput of 832,329 in 2008. BMI notes that the latest container throughput results at Bandar Abbas demonstrate a decline, which we have predicted and expect to continue throughout the rest of the year. In 2008, the port broke the 2mn TEU mark and registered a y-o-y growth of 16.1%. BMI forecasts that throughput at the facility will decline by 6.4% in 2009 to 1.87mn TEU. This decline is due to our predictions for Iran's trade sector. BMI's Middle East Country Risk Desk forecasts that the country's imports will fall by 4%, with Iran's exports expected to decrease by 5%. We expect throughput at Bandar Abbas to recover quickly after 2009, with container throughput growth of 6.7% forecast for 2010, which will place the facility on the road to recovering its pre-downturn throughput volumes. The port is located in the south of Iran and, according to the Container Management Journal; the facility is the most important port in the Persian Gulf region after the UAE's Jebel Ali port in terms of container operations.

In our latest Iran Freight Transport Report, BMI concludes that total freight traffic will grow by an average of 3.8% per annum in the 2009-2013 forecast period. Our forecast reflects the interplay of negative and positive factors. On the negative side, the turbulence over the recent elections is a downside risk. It is also clear that necessary investments in new pipelines, shipping and port and rail capacity have simply not been made. Also weighing down on the forecast is the fact that the oil price boom is over for the next couple of years, reducing foreign currency earnings. There are, of course, positives. One is global demand for Iran's natural gas and petrochemicals, much of which will need to be pumped to coastal terminals and shipped by liquefied natural gas (LNG) tankers. New investment and export deals with China underline this potential. The general growth of the Iranian economy and trade, although moderate, will also provide support.

By transport modes, road-haulage growth has lagged behind GDP in recent years, reflecting the poor quality of the highway network. Our forecast provides for a catching-up process, as overland trade with Iran's immediate neighbours begins to grow. For 2009-2013, we predict annual average road-haulage volume growth of 4.0%, ahead of GDP. Rail freight has lagged behind the general growth of the Iranian economy, but here we are less optimistic over the 'catch-up' potential. Despite much talk of building a new rail-based north-south transport corridor linking Iran to its regional neighbours, we take the view that there will not be significant increases in capacity during the forecast period. Rail-freight growth will average an unimpressive 2.0% per annum. Airfreight will grow at an annual average of 4.8%, constrained by an ageing aircraft fleet and the effect of US sanctions. For the core freight modes of pipelines and shipping we see the global recession of 2009-2010 taking its toll. Pipeline throughput will average 4.8% annual growth, with shipping at 5.3%, both ahead of GDP growth by a small margin. Iran sits at the bottom end of BMI freight rating for markets in the Middle East and Africa (MEA) region. Given the country's abundance of natural resources, this is a reflection on the domestic political situation, regional uncertainties and lack of a track record in providing investment opportunities in the transport sector.

The total value of transport and communications GDP will rise to US$35.6bn in nominal terms by 2013, 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 3.41mn people, or 20.5% of the labour force, in 2008