Thailand Freight Transportation Report Q2 2008

The Thai road haulage industry was in January reported to be in something of a dilemma over how fast and how far to pursue the officially sanctioned policy of converting trucks from diesel to natural gas for vehicles (NGV). Rising diesel costs have reduced profitability over the last two years. But Chumpol Saichuer, chair of the Logistic Alliance lobby group, said in January that only the larger road haulage companies with sufficient capital had been able to change the diesel engines on their lorries to run on NGV. The industry's overall aim was to convert 200,000 of Thailand's 700,000 lorries to NGV, which if achieved could save the country THB500mn (US$16.1mn) a day in energy costs. The current cost of diesel was THB30 (US$0.96) a litre, compared to THB8.50 (US$0.27) per kilogramme for NGV. One litre of diesel is the equivalent of around 1.2kgs of NGV. Chumpol said the cost of converting engines to NGV was high, but could be recovered in around 10 months of operation. Truckers were resistant to making the change-over for three reasons: the high capital cost of making the change, the fact that there were not yet enough service stations around the country selling NGV, and because the NGV on sale was of somewhat unstable quality. Chumpol called on oil and gas conglomerate PTT to do more to spread the availability of NGV, and for the government to provide loans to facilitate engine conversion. In this report, BMI concludes that domestic political and investment uncertainties will hold back road haulage growth somewhat in our 2008-2012 forecast period, although due in part to regional developments, it will still hit an annual average of 5.7%, measured in tonne-km.

BMI's forecast is based on a variety of factors. Our Thai GDP growth outlook is for an average annual expansion rate of 5.1% over the next five years, down from 5.4% previously. Although road haulage traffic will grow faster than the economy as a whole, our latest figure has been trimmed a little to reflect the slowdown in the road-building programme - due to budget uncertainties, ongoing congestion and high petrol prices. Pushing in the other direction is the fact that Thailand remains an intensive user of road freight versus other transport modes, and will continue doing so as demand remains strong. Road haulage will be driven upwards as the development of highway links across the Mekong delta open up new roadbased export routes.

Across all modes, total freight will grow by an annual average of 6.1% in 2008-2012. This is quite a bullish figure. Even taking into account the negative impact of ongoing disruption following the switch in September 2006 to a new international airport in Bangkok, high jet-fuel costs and other issues, we still expect the strongest growth to be registered in air freight turnover. This is based on what we see as the big surge in the regional air cargo business, driven by the expansion of new commercial lines and deregulation of routes and airport slots. Air freight turnover should grow by an average annual rate of 8.7% in the forecast period. We estimate Thailand's maritime cargo to grow by an annual average of 6.0% during the forecast period. Container traffic is expected to expand somewhat faster, with the total number of 20-foot equivalent units (TEUs) handled growing at an average annual rate of 8.6%. Railway freight traffic should expand at a lower rate of 5.5% per annum.

BMI's freight transport index for Thailand comes out at 55.9 (out of a theoretical maximum of 100.0).

Thailand's best performance is in areas such as freight growth, infrastructure growth and the transport intensity index (a measure of the dynamism of foreign trade). Areas in which it could do better include long-term political and economic risk and the regulatory environment.

BMI expects the total value of transport and communications GDP to rise to US$29.4bn in nominal terms by 2012, representing 8.7% of Thailand's GDP. The transport and communications sector employed 1.04mn people, or 3.0% of the labour force, in 2007. We see the figure rising to 1.10mn by 2012, remaining at 3.0% of the labour force.