Freight Strengthening As Imports, Exports, Transit And Transhipment Pick Up
Romania's freight transport sector will experience a strengthening in growth in 2013, as the country's domestic macroeconomic growth picks up. The country's freight transport sector will also benefit from an uptick in the macroeconomic outlook of its key trading partners and that of its neighbours, with Romania's freight transport sector also playing a role in transit and transhipment in Europe.
Romania's freight transport sector will benefit from the country's improving macroeconomic climate. In 2013 we forecast the country's real GDP to expand by 1.7%, a strengthening on the 0.5% estimated growth in 2012. Over the medium term (2013-2017), we forecast economic growth to continue expanding, with the country's real GDP forecast to increase by an annual average of 3.4%.
The impact of this positive growth outlook will feed through to the country's import demand. In 2013 BMI projects Romania's real import growth to expand by 7.5% y-o-y, a strengthening on its 3.4% increase in 2013. Over the medium term, we forecast the country's real import growth to increase by an annual average of 7.6%.
|Improving Macro Climate|
|Romania Real GDP Growth, % Change y-o-y and Romania Imports and Exports, Real Growth, % y-o-y|
The country's freight transport sector will also benefit from the brighter outlook in Romania's export sector. The country's main export partner is the eurozone, which, although forecast to record a growth of just 0.1%, this is an improvement on 2012, when we estimate the eurozone dipped into recession. Romania's export growth (measured in real terms) is forecast to benefit from this with BMI projecting the country's exports to increase by 5.4% in 2013 up from an estimated growth y-o-y of 4% in 2012. Over the medium term, we forecast Romania's exports to growth by an annual average of 6.6%.
We do, however, highlight downside risks to the country's export outlook, which is the reason the country's export growth is not as robust as that which we project for the country's imports. Romania's two largest export partners are Germany and Italy, and in Germany we forecast the country's economic growth to stagnate, while in Italy we forecast another year of recession, a view that is further cemented by the risks to the country's economic outlook following an indecisive election outcome at the time of writing (February 2013).
|LHC: Romania's Export Partners (% of Total). LHC: Italy Real GDP Growth, % change y-o-y & Germany Real GDP Growth, % change y-o-y|
The country's freight transport sector also plays a transit and transhipment role, with the port of Constantza the Black Sea's major transhipment hub and also a maritime gateway in and out of Europe. Romania's role in Europe transit market is highlighted by the fact that the country is crisscrossed by three pan-European transport corridors (transport corridors four, seven and nine).
These link Romania into the greater European supply chain, with Romania a key part of the logistics network for its landlocked neighbours Hungary, Moldova and Serbia. BMI expects Romania's freight transport sector to benefit from the improving macroeconomic outlook of these countries, with Moldova's real GDP set to strengthen from an estimated 0.5% increase in 2012 to 3.5% in 2013. Serbia is forecast to emerge from recession, with an estimated contraction of 1.9% in 2012, with a growth of 1.9% projected in 2013. Hungary, while still in recession, with a contraction of 0.4% forecast in 2013, is on its way to growth.
|Transit Demand To Improve|
|Hungary, Moldova and Serbia Real GDP growth, % change y-o-y|
Romania's trade sector is centred in Europe, where the majority of its import and export partners are located. The country is, therefore, heavily reliant on road, rail and inland waterway to meet its trade needs.
Road: Dominating, But Still In Recovery
Road freight, as in most Europe countries, dominates Romania's freight mix forecast to account for 68.4% of the total freight carried in the country in 2013. The sector is projected to record the strongest growth y-o-y out of road, rail and inland waterway in 2013 with road haulage volumes forecast to expand by 5.1% to reach 195.6mn tonnes, a strengthening on the 1.1% estimated increase in 2012, in line with macroeconomic growth.
Over the medium term, we project road haulage volumes to expand by 33%, an annual average increase of 5.9% to reach 247.6mn tonnes by 2017.
|Road Dominates, But Sector Diversifying|
|LHC: 2007 Hungary Freight Transport Market Share Breakdown. RHC: 2017 Hungary Freight Transport Market Share Breakdown.|
Despite this robust growth outlook, road freight's market share, while remaining dominant, is declining. In 2007, road freight accounted for 78.4% of the total and we project that to fall to 72.2% in 2017. BMI believes that further diversification away from road freight in Romania will continue, as the scheme has the backing of the EU, which is trying to address the problem of pollution and congestion in the region's transport sector.
BMI also highlights that while a 33% increase in road freight levels over the medium term is relatively strong it will still not be enough for the country's road freight volumes to recover to their pre-crisis levels.
|Still In Recovery|
|Romania Road Freight, '000 tonnes and Romania Road Freight 2008 Level|
In 2008 Romania's road freight sector handled 365mn tonnes of freight, by the end of 2017 we project the sector to have only recovered to a level of 247.6mn tonnes. This is due to the two consecutive years of decline in 2009 and 2010, with drops of 19.6% and 40.7%, respectively, which the sector is still in the process of recovering from.
Rail: Upside Risk To Forecasts From CFR Marfa Privatisation
The country's rail freight, while also not projected to be able to make a full recovery over the medium term, handling 68.8mn tonnes in 2007 and projected to handle 66mn tonnes in 2017, is forecast to come closer to making a full recovery when compared to road.
This is in part due to the fact that although rail, like road, witnessed two consecutive years of decline (in 2008 and 2009, when rail freight volumes declined by 3% and 24.2% respectively) the decrease wasn't as strong as that witnessed in the road freight sector.
We forecast that rail freight volumes will grow by 1.6% up from an estimated 1.2% in 2012 to reach 62.4mn tonnes in 2013. Over the medium term, we project Romania's rail freight levels to expand by 7.4% an annual average of 1.4% to reach 66mn tonnes.
|Risk To The Upside|
|Romania Rail Freight, '000 tonnes and % change y-o-y|
We do, however, highlight two rail specific upside risks to our medium-term forecast. The first is the fact that rail freight is the most obvious freight sector to benefit from any diversification away from the use of road haulage, we are already projecting to some extent the positive impact of this with rail freight predicted to account for 19% of the total freight carried in Romania in 2017 up from 15% in 2007. Rail freight's market share would, however, expand more quickly should the more away from road quicken its pace.
The second risk to the upside stems from Romania's plans to privatise a 51% stake in the country's main rail freight operator CFR Marfa, which is due to take place in July 2013. The new majority stake holder will likely bring investment and expansion plans for the company with them, offering upside risk to our current rail freight forecasts.
Inland Waterway: Danube Connection Offers Considerable Potential, But Investment Required
BMI believes that Romania's inland waterways could also benefit from a diversification away from road freight. The sector accounted for 6.5% of the total freight carried in 2007 and we project this to increase to 8.6% in 2017.
The country's inland waterway network, stretching for 1,731km, is dominated by the Danube River, which accounts for 1,075km of Romania's total inland waterway network. Romania's access to the Danube River not only offers the country internal freight options, but also freight connections to Austria, Hungary, Bulgaria, Croatia, Serbia, Slovakia, Moldova, Ukraine and Germany.
As with rail freight our forecasts for Romania's inland waterway freight sector is exposed to upside risk, should a move to diversify away from road freight quicken. We currently forecast Romania's inland waterway freight volumes to grow by 1.5% in 2013 to reach 27.9mn tonnes, an improvement on the 6.3% decline which we estimate for 2012. Over the medium term we forecast Romania's inland waterway freight volumes to grow by 7% to reach a projected 29.5mn tonnes in 2017. This is however just off the 30.3mn tonnes that the country's waterways handled pre-downturn in 2008.
BMI considers the Danube River's freight potential to be underutilised. As highlighted, the River offers freight connections to nine countries, but considerable investment must be made for it to realize its true potential, as a major inland waterway conduit for freight in Europe. BMI believes that dredging projects would be a good place to start in the river's development, as its relatively low draught in places lead to the waterway shutting down in the winter, when parts freeze over due to the shallowness of the draught and in the summer, when the draught leads to low water levels, which also disrupt transport.
Air: Small Freight Player, But Growing
Air plays a relatively small role in Romania's freight transport sector, forecast to handle just 27,130 tonnes in 2013. The sector is however continuing to expand in line with the domestic, regional and global macroeconomic outlook. In 2013 we forecast air freight volume growth to strengthen, with a y-o-y increase of 2.4% projected up from an estimated y-o-y increase of 1.3% in 2012.
Over the medium term we project air freight volumes to grow by 22%, an annual average increase of 4% to reach 32,330 tonnes in 2017.
The part privatization of Romania's flag carrier Tarom, due in July 2013 offers some upside risk to our medium term forecast, but a minority stake of just 20% is up for grabs, curtailing the impact a new investor would have on the company's strategy. We highlight that further growth opportunities for Romania's freight sector could emerge from foreign carriers, with a number of Middle East air cargo operators showing an interest in emerging Europe.
Maritime: Robust Growth To Continue
Romania's port of Constantza not only caters for Romania's import and export needs, but has also developed into maritime gateway for goods in and out of Central and Eastern Europe and also a transshipment point for container traffic in the Black Sea.
In 2013 we forecast another robust year of total tonnage throughput growth at the port of Constantza, with volumes forecast to increase by 13.2% to reach 57.3mn tonnes, up from the 10% growth recorded at the port in 2012.
Over the medium term we project total tonnage volumes at the port to expand by 48.6%, an annual average of 8.3% to reach 75.2mn tonnes in 2017.
We highlight that the port is also a major container shipping player in the Black Sea, but that its role as a transshipment hub is in jeopardy as operators start to ship directly to the Russian port of Novorossiysk and Ukraine's maritime facilities. We don't believe that this will have much impact on the port's total tonnage volumes, but for more information on Romania's maritime sector please see BMI's Romania Shipping Report.