Q&A/UPDATE - WCA - STEPHEN KNIGHT - REGIONAL EXECUTIVE - JUNE 2010
What has business been like for Safmarine in the West Central Asia (WCA) region in 2010? Pse provide a high-level overview of the first five or so months.
The business environment in 2010 has been stronger than we were forecasting with high ship utilisation and freight rates increasing to a more sustainable levels than those seen in 2009.
Are there any particular business/consumer trends which are influencing your business in this region?
GDP growth remains strong in India at 8.3% which is our largest market in the region. This, along with increasing populations and purchasing power parity (PPP) in the Indian Sub Continent, are key drivers of growth.
We have also seen the main Middle East oil economies recovering as the oil price rose back up to the USD 75 - USD 85 per barrel range; this has led to an increase in consumption and government investments in infrastructure.
How do/does container volumes/business to date compare with 2010 - exports and imports in to the region as a whole? Please provide an overview of 2009 (exports and imports into the region and the impact of the global recession).
Volumes in the first quarter were higher than expected and showed a sharp increase compared with the same period for 2009. Exports have been strong to the consumer markets in Europe and North America as well as our core Africa markets. Imports have also increased from most markets with Europe showing the highest growth.
What are your expectations for the container business for the rest of 2010?
It is quite difficult to predict at this stage with the economic uncertainties in Europe. While we have had a stronger than forecast first quarter, we are still cautious about the full year.
What is Safmarine's business focus for the WCA region?
Our focus is on increasing efficiency, our relationships with customers and the solutions we are able to offer them. While we cannot control the size and volume of the market, we can control how we deal with our customers and how we spend and deploy our resources.
Pse comment on infrastructural developments in your region.
There are huge investments in the Middle East part of the region. This is a combination of transport and industrial development projects within the oil based Gulf countries. We also see high investments in new petrochemical production facilities, particularly in Saudi Arabia, Iran, Qatar and U.A.E.
Has congestion been an issue for your region?
We have not had any challenges this year.
What is your key message to customers in the WCA region?
The Middle East and Indian Sub-Continent are key areas for Safmarine and we are continuously monitoring the market and reviewing how we can improve our service offerings. We are also focusing on how we can continue to improve on customer service and make it as easy as possible for our customers to do business with us.
Which countries are showing the most promise in the WCA region?
The top three importing as well as top three exporting countries in WCA - for Safmarine - are India, UAE and Pakistan.
India is the largest market in the region and we are seeing good growth particularly on the import of consumer goods from Europe and USA.
Exports from Saudi Arabia have increased, primarily due to petrochemical goods to Europe and the Far East. Imports have also been strong especially consumer goods and industrial equipment from Europe.
Bangladesh is a developing market in particular on the garments trade. The retailers in USA and Europe are switching some sourcing to the country away from higher cost origins.
Which are the highest performing sectors in your region and what are the reasons for this?
The petrochemicals, automotive and garments industries are the top three export commodities for the WCA region. Consumer goods, foodstuffs, vehicles and construction materials are the highest volume import commodities.
Which countries are the WCA's region's key markets?
The countries in the Arabian Persian Gulf have traditionally traded with Europe and USA, but the Far East has become an important market and the Intra region trade is also strong. As an Africa specialist, Safmarine has also been active in growing the trade between the Indian Sub Continent /Arabian Persian Gulf regions to and from Africa. The trades to Europe, Africa and the America are, from a Safmarine point of view, the three most important trades for the region.
Which trades are the three most important trades into and out of this region?
Prime (WCA to Europe)
Simap (WCA to North America/Canada)
Prime (Europe to WCA)
Simap (North America/Canada to WCA)
Feme (Far East - Middle East)
Have you introduced any new services or service enhancements? If so, please provide details.
a) The re-introduction of the ME 3 service between the Mediterranean and West Central Asia. The focus of the revised ME 3 service is on providing an improved product, rather than on increasing capacity, hence the decision to add a direct call at Ambarli and to deploy smaller vessels on the revised service. Together the changes made to the ME 1 and ME 3 will result in an improved Intra-Middle East service as these services will provide more frequent departures from West and North India to Jebel Ali and the ports served in this region.
b) The Asia to the Horn of Africa and Red Sea service which will call at Jebel Ali giving us connections to and from the Gulf.
c) We have added Sharjah, UAE to the rotation of the Masiika Express giving direct access to the east Africa
What is the status on rates into and out of WCA? How do rates compare to 2009 and is there still a need to increase them?
The rates in 2009 were loss giving and unsustainable. They started to increase in the fourth quarter and that trend has continued in 2010 across most of the trades. We still see a need to increase further to give a sustainable return on the assets that are deployed.
What is the status on reefer into and out of WCA?
Our imports into consist mainly of shipments of fruit and meat from South Africa, South America, Northern Europe and Egypt with the majority of the cargo moving to the Middle East countries rather than India Sub Continent. The exports are loaded mainly from India and Pakistan and consist of grapes to Europe and kinos to the Arabian Persian Gulf. Volumes for 2010 YTD are roughly in line with the same period in 2009.
What is the status on vessel/container capacity to and from WCA?
The ships have been full on all services to and from the region through the first four months of the year with very strong demand to/from Europe and North America.
Safmarine's WCA (West Central Asia) region covers Arabian Persian Gulf and Red Sea and the Indian Subcontinent.
a) The Arabian Persian Gulf
- The Arabian Persian Gulf and Red Sea includes the following countries; Saudi Arabia, United Arab Emirates, Oman, Kuwait, Bahrain, UAE, Iran, Iraq, Qatar, Yemen and Jordan. These economies are mainly driven by oil revenues.
- The top three countries are UAE, Saudi Arabia and Iran.
- Dubai is the trading hub of the region and many international companies have based their distribution hubs in the Jebel Ali Free Zone.
- This market is fairly diversified eg Dubai is largely forwarder driven while the rest of the Gulf is predominantly focused on the export petrochemicals industry and the import of consumer goods.
- The Gulf market is essentially an import driven market.
- Safmarine saw an increase in volumes to this region, despite the downturn in the global economy.
- Exports in many of the petrochemical countries - such as Saudi Arabia, Qatar, UAE and Iran - have increased as new production facilities come on line, a positive trend which we anticipate will continue for the next 3-5 years.
b) The Indian Subcontinent
- The Indian subcontinent includes the following countries; India, Bangladesh, Sri Lanka and Pakistan. - These economies are very diverse and are driven by huge populations with rising purchasing power.
India, the largest economy in the region, is also Safmarine's biggest market in this region and the third largest globally.
- The volumes of machinery, consumer goods, textiles, foodstuffs and automotive products moving from India to Africa are very encouraging.
- Safmarine-wise, India and Pakistan are more export-driven although these markets are generally balanced from an export/import perspective.
- Both India and Pakistan are rather diversified markets. India is essentially forwarder driven; forwarding companies export high volumes of commodities and manufactured goods.
-The commodity market is strong in countries such as Bangladesh, Sri Lanka and Pakistan; the garment industry is also significant in these countries while tea is the main commodity for Sri Lanka.
- We see positive future potential for Bangladesh, where exports are growing (particularly as a result of an increased demand from retailers)
as at June 7, 2010
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