Taiwan Freight Transport Report Q1 2010 - New Report Published

Published on December 17, 2009

by Press Office

(Companiesandmarkets.com and OfficialWire)

LONDON, ENGLAND

Building work on three new high-speed railway stations (in Miaoli, Changhua, and Yunlin counties) would begin in January 2010, the minister of transportation and communications, Mao Chi-kuo, announced at the end of September. If construction went ahead without delays, the stations would be ready by June 2015, over five years later than the date originally agreed by the ministry and the troubled operating company, Taiwan High Speed Rail Corp (THSRC). Agreement on the new date came after arrangements were put in place for a restructuring of THSRC's heavy debt burden and a reorganisation of its board of directors due in November. Since the company began operations in January 2007 it had built up accumulated losses (as at end-June 2009) of TWD70bn (US$2.15bn), representing around 66% of its paid-up capital, and total debts of some TWD400bn (US$12.31bn). Amid growing concern over the future of the company, the government finally intervened in September, after chairwoman Nita Ing presented her resignation and was replaced by former CEO and career civil servant Ou Chin-der as a nominee of the public shareholders in THSRC. The government became involved in the debt restructuring discussions and it was presumed it would be helping to finance construction of the much-delayed stations, thought to cost as much as TWD7.5bn.

Since our last report, we have maintained our gloomy 2009 forecast for GDP growth in Taiwan, but are now more optimistic about the immediately subsequent years. 2008 growth was 0.1%, and we continue to project a 2009 contraction in GDP of 4.5%. These figures constitute our latest update and may supersede those in the preceding section. We have raised the outlook for 2010 to 3.5% growth (was 1.5% and have lifted 2011 to 4.0% (was 3.0%).Our forecast for 2010-2014 is for an annual average GDP growth rate of 4.1% per annum (compared to 2.1% in the preceding five-year period). The effect on our freight traffic forecasts for the period as a whole relative to the preceding one is, therefore, positive. The airfreight forecast was cut back earlier, based on growing signs that traffic is diverting to mainland China, with Shanghai emerging as an important Asian hub and taking business away from Taipei. Maritime freight projections have also been recalculated and linked more directly to foreign trade movements. As a result of these adjustments, we now expect overall freight turnover across all modes, measured in mntkm, to rise by an annual average of 4.1% in 2010-2014.

According to our latest estimates, transport and communications GDP will have fallen by 4.4% in 2009, marginally less steeply than overall GDP which will contract by 4.5%. For the 2010-2014 forecast period, we expect the transport and communications sector to grow marginally ahead of the wider economy at 4.2%. The total value of transport and communications GDP will rise to US$37.6bn in nominal terms by 2014, representing 7.2% of Taiwan's GDP. The transport and communications sector employed 492,000 people, or 5.0% of the labour force, in 2009. We see the employment figure rising to 507,000 by 2014, 5.1% of the total labour force.

In shipping, the global boom crashed in 2008/09. Despite some fears within the industry, we do not see a long-term slump in the maritime cargo business, in which companies from Taiwan are major global players. For the forecast period, we believe maritime cargo traffic will grow by an average of 5.3% per annum. As mentioned, we have recently downgraded prospects for air freight. While electronic components and equipment made in mainland China were previously exported by air via Hong Kong and Macau to Taipei, now they are increasingly being shipped out directly via Shanghai. This has led us to estimate an average annual growth rate of 4.3% in air freight to 2014.

Road freight traffic will evolve moderately, with average growth of 2.9%. In this area, Taiwan resembles a developed economy where traffic growth tends to trail, rather than lead GDP expansion. We are also predicting modest rail cargo growth. Here, we are mindful of the fact that rail cargo traffic has been falling since 1997, mainly because it has been displaced by passenger business. We believe the introduction of the bullet train service has relieved some of this pressure, making cargo capacity available again. We are predicting rail cargo traffic growth of around 2.5% per annum to 2014, below the general rate of growth of the economy.

Taiwan Freight Transport Report Q1 2010: http://www.companiesandmarkets.com/r.ashx?id=FSWER16DM192338