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UPDATE - WEST & CENTRAL ASIA (WCA) - OCTOBER 2009
Update provided by Stephen Knight - Safmarine Executive for the West and Central Asian (WCA) Region
Pse note: Safmarine's WCA region covers the following geographic areas and is broadly divided into two very distinct markets; namely:
1. The Arabian Persian Gulf and Red Sea - which includes the following countries; Saudi Arabia, United Arab Emirates, Oman, Kuwait, Bahrain, UAE, Iran, Iraq, Qatar, Yemen and Jordan - where the economies are mainly driven by oil revenues, and
2. The Indian subcontinent which includes the following countries; India, Bangladesh, Sri Lanka and Pakistan; the economies of these countries are very diverse and are driven by huge populations with rising purchasing power.
General Safmarine comment: WCA region
- The petrochemicals, automotive and garments industries are the top three export commodities for the WCA region.
- The top three importing as well as top three exporting countries in WCA - for Safmarine -are India, UAE and Pakistan.
- Safmarine has noted an increase the number of reefer products being exported from the region (mostly from India) and an increase in the volumes of perishables into the Gulf region.
- Infrastructure projects and development slowed during the first part of the year (2009) due to the global financial situation however. These projects have begun to show growth recovery (in the second half of the year), particularly in the GCC countries; this thanks to the support of governmental investments. (GCC - Gulf Cooperation Council - is an economic agreement similar to the European Union and covers the Gulf states of Bahrain, Kuwait,Oman, Qatar, Saudi Arabia and The United Arab Emirates.)
- Volume wise, 2009 started slow; improving as the year progressed. The current low freight rates are affecting shipping line profitability and are not sustainable and we have been working to restore the rate levels in the second half of the year.
- Overall the WCA region is doing well on exports and imports and we expect the growth to continue throughout the second half of 2009.
- We also believe we will start to see benefits from the service enhancements introduced on our key trades. (see below for details)
- Because there is no clear view on how long the current global economic challenges will last, we are focusing on those elements of our business that we can control. Our focus is on costs, 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.
- We are further encouraged by the positive response we've received from our customers in this region; the Safmarine WCA team was the highest scoring region in the most recent Safmarine Customer Satisfaction Survey and this bodes well for increasing Safmarine's business in the WCA region.
DETAILED OVERVIEW OF THE TWO MARKETS IN THE WCA REGION FOLLOWS:
1. The Arabian Persian Gulf and Red Sea market
General Overview
- The lower oil price in the second half of 2008 and early 2009 resulted in a general slowdown in the economies of these regions; in several areas we've seen a slowdown in construction and infrastructural projects which have also been impacted by the overall drop in market confidence (as a result of the global financial crisis). The rebound in the oil price has seen confidence start to return with positive growth forecast for 2010.
- Dubai is the trading hub of the region and many international companies have based their distribution hubs in the Jebel Ali Free Zone.
Trade overview
- 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 Middle Eastern trade is also strong.
- As an Africa specialist, Safmarine has also been active in growing the trade between the Arabian Persian Gulf region and Africa.
- The trades to Europe, Africa and the Americas are, from a Safmarine point of view, the three most important trades for this region.
Market overview
- The 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.
- Countries such as Iran and Iraq are showing strong potential for growth, particularly as relationships with the West strengthen. Safmarine has seen 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 coming on line, a positive trend which we anticipate will continue for the next 3-5 years.
2. Indian subcontinent market
- India, the largest economy in the region, is also Safmarine's biggest market in this region.
- 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, Pakistan, 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)
Trade overview
-The first three months of 2009 saw a drop off in rates - as a result of over-capacity and a slow-down in volumes - which affected our profitability.
Service enhancements and profile
- From a Safmarine point of view, the most important trade for the Indian subcontinent is the trade with Europe.
- 2009 started with a number of improvements to the India - Europe service network and these benefits have been made available to the customer base.
Service enhancements made earlier in 2009 include:
· ME1 (Prime Express) service (which goes to northern Europe) - direct calls have been introduced Eastbound from Europe into Aqaba in Jordan and Bandar Abbas in Iran to cover import and export and westbound to Europe from Pipavav to service the important North West Indian market. These changes also provide a number of improved products on the Intra Middle East trade network.
· ME3 (Prime Express) service to Mediterranean coast; the service has been enhanced to include a direct call into Pipavav which is the gateway to and from northern India. This also gives Safmarine - and our customers - a direct routing from Pipavav and from Mumbai into Jebel Ali which is an important high volume intra regional market.
· A direct service from Jebel Ali Port, Dubai to Mombassa has been introduced, which has strengthened the Middle East's trade with East Africa .
· A direct call at Houston has been added to the MECL 2 service which sails to and from Chennai, Colombo, Salalah and Aqaba.
ends
As at 6 October 2009
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