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South Korea Freight Transport Report Q3 2007Product Type: Market Research ReportPublished by: Business Monitor International Published: September 2007 Product Code: R302-1478 Description In 2006, South Korea announced plans to modernise its port facilities and streamline their operations inan effort to attract more foreign shipping lines and become the main logistics hub for North East Asia. Late in the same year, the government said it would revamp port infrastructure by setting up an automated operation system, enhancing security standards and lifting a ban on night time operations. Much of the focus would be on capturing more China- and Japan-related freight business. In early February 2007 the authorities said they were looking to seal co-operation links with four strategic Chinese ports as well as with the port of Niigata in Japan. On the other hand, actual trade volumes flowing through new ports at Pusan and Daesan has been disappointing. On balance, BMI is expecting moderate to strong shipping growth in South Korea. Our newly released South Korea Freight Transport Report concludes that despite a slightly less dynamic performance by exports and the downturn of the shipping cycle, freight carried by sea will grow by an annual average of 6.4% in 2007-2011. The background is that the country will continue to have a dynamic trade-oriented economy, increasingly geared to opportunities in China, and significantly reliant on water-borne transport. At some point in the future, land-based freight routes will be boosted by the opening up of a rail link through North Korea. The latest partial thaw in North-South relations points to future progress for this project, but we expect many starts and stops. In the meantime, South Korean shipping companies are reasonably healthy, despite a squeeze on margins. Hyundai Merchant Marine (HMM) was the country’s top shipping line in terms of gross tonnage in 2005, with 35 vessels amounting to 2.55mn gross tonnes. South Korea’s second-largest company by gross tonnage was Hanjin Shipping, with 48 ships totalling 2.33mn gross tonnes, followed by SK Shipping’s 1.53mn gross tonnes and STX Pan Ocean’s 1.48mn gross tonnes. Shipping’s good prospects are mirrored by other transport modes. BMI expects total freight carried, measured in million tonnes-km (mntkm), to grow by an annual average of 6.9% in 2007-2011. In road haulage, the current national development plan calls for the construction of seven new north-south expressways and nine east-west ones, part of the government’s commitment to ensure that it will take not more than half a day to move people or goods between any two points in the country. Bearing these capacity increases in mind, we foresee that road haulage tonnage will increase by an average of 7.7% per annum in 2007-2011, and remain the fastest-growing cargo mode. Cargo traffic on rail on the other hand, has dwindled in recent years, given that capacity has not expanded and the share of passenger traffic has increased. We expect rail freight tonnage to grow at an average rate of 2.4% during the forecast period. Airfreight tonnage will grow by around 7.2% per annum. BMI has given South Korea a score of 48.0 (out of a potential maximum of 70.0) in our freight transport business environment index. The country’s strong points are long-term political risk and transport infrastructure growth, with good scores for long-term economic risk and the regulatory environment. The total value of transport and communications GDP will rise to US$114bn in nominal terms by 2011, representing 9.6% of South Korea’s GDP. The transport and communications sector employed 1.35mn people, or 6.0% of the labour force, in 2006. We see those figures rising to 1.45mn and 6.1% by 2011. Table of Contents
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