Strike Risk From Piraeus Sale, But Box Growth To Continue
The announcement of the conditions for the sale of a 67% stake in the port of Piraeus has been met with strikes in the Greek port sector. The previous privatisation drive in the Greek port sector led to rolling strikes, which crippled ports and led to a double-digit decline in container throughput at the port of Piraeus. BMI is wary of the impact of potential industrial action on port throughput this time round, but believe the disruption won't be so severe. Over the longer term the privatisation of the port will lead to greater investment in the facility and the potential for Piraeus to play a greater role in the global supply chain.
The sale of a 67% stake in the Piraeus Port Authority (in which the Greek state holds a 74% stake) is moving forward, with the stake due to be put up for sale in 52 days after the sale terms have been presented to the Greek Parliament. The news was met with work stoppages by Greek dockworkers in protest against the planned privatisation of the port. Further protests are planned along with a demonstration for the day when the sale will be debated in parliament.
Further industrial action by Greek port workers in protest of the new privatisation drive is likely and this places a threat to throughput volumes at the nation's ports. In 2008, during the last port privatisation scheme, rolling strikes led to a 68.4% decline in container throughput at the port of Piraeus.
However, the impact of strikes at Piraeus this time round be minimal. China's COSCO Pacific operates a container facility at the port, which uses non-unionised labour and so any calls for nationwide port strikes will not impact throughput at COSCO Pacific's operations. The Chinese port operator accounts for the majority of container traffic at the port, making up 78% of the facility's total box throughput in 2013. BMI is therefore holding with its 2014 growth outlook of the port of Piraeus with a y-o-y growth of 20% forecast to take container throughput levels to a projected 3.8mn TEUs.
|Strikes To Have Minimal Impact This Time Round|
|Port Of Piraeus Container Throughput, TEUs & % Change y-o-y|
The planned stake sale in the port offers upside risk to our medium-term throughput forecasts with an investor, set to bring funding and expertise. COSCO Pacific has stated that it is interested in increasing its stake in the port of Piraeus and so is set to be a likely bidder when the 67% stake is put up for sale. The positive impact upon the port's container throughput following the launch of operations by COSCO Pacific can be seen in the volumes handled at the port since 2009. Between 2009-2013 the port's container throughput levels have expanded by 376% from 664,895TEUs to 3.2mn TEUs.
The positive impact of a new investor in the port of Piraeus offers upside risk to our medium-term forecasts. BMI currently forecasts container throughput volumes at the port to grow by 94% over the medium term to reach a projected 6.1mn TEUs. Tonnage throughput at the facility is forecast to expand by 32% over this period to reach a projected 20.4mn tonnes.
The port of Piraeus is one of Greece's few success stories, with the port's container operations outperforming most other sectors of the economy in growth terms. This is due to the port's low exposure to the domestic market. In 2013 Greek imports and exports through the port accounted for just 6.8% of the port's total box throughput. The facility's dominant operations are transhipment, which accounted for 77.3% of the of the port's total container throughput in 2013.
BMI expects this focus to continue with COSCO Pacific developing the port into a key transhipment hub for the Mediterranean. We also note that the port is expanding its role in the gateway market offering transit options for European states. An example of this is the planned first freight train, due to depart the port en route to the Czech Republic in March 2014. The freight train is set to run once or twice a week and will offer more supply chain options for shippers in landlocked Czech Republic.