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Israel Freight Transport Report Q4 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: October 2009 Product Code: R302-8571 Description According to a Globes report in September 2009, Israel Corporation (Israel Corp) was to hold aspecial shareholders meeting on October 14 2009, to discuss strategies to help Zim IntegratedShipping Services. Israel Corp expects its subsidiary company to face financial instability in 2009 and2010, with a gradual improvement starting in 2011. Zim is unsure whether it can pay its debts on timeand is asking creditors for concessions. The company expects to register a cash flow deficit of nearlyUS$1bn between 2009 and 2013. The dire situation facing Zim was illustrated in the company'srecently-released H109 results. Revenue for H109 stood at US$1.165bn, down 47% from H108'srevenue of US$2.213mn. Like all container lines, the company was hit by the decrease in global tradevolumes and the decline in freight rates. Zim is one of the 20 largest container shipping companies inthe world and has 89 vessels in operation, of which 26 are fully or partially owned.Since our last quarterly report, we have again revised Israel’s growth prospects - but this time it is anupward revision. We now predict a 2009 GDP contraction of 0.9% (was -1.9%) and expect growth of2.4% (no change) in 2010. For 2009-2013, economic growth will be an annual average of 1.9%, belowthe much more robust 5.5% average registered over the preceding five years. The effect on our freighttraffic forecasts for the period, compared with the earlier one, is therefore quite sharply negative. Wecontinue to make adjustments to our mode-specific estimates and forecasts, cutting back maritimefreight growth because of the global recession in 2009, the downturn in the shipping cycle, and thedifficulties facing Zim Integrated Shipping. The big road-building programme may meet fiscalconstraints. We have trimmed back rail freight based on the available published data. The spike inenergy costs in Q308 followed by the slump in freight demand in Q408 and 2009 has been a difficultcombination to handle for the air freight, road haulage and shipping sectors in particular. Taking allthese factors into account, our forecasts for freight carried across all modes and measured in mntkm isnow an annual average of 0.9% in 2009-2013. According to our latest estimates, transport and communications GDP rose by 5.9% in 2008, a littleahead of overall GDP which rose by 5.5%. For 2009-2013, we now expect the sector to grow a littlefaster than the wider economy. It will expand in value terms by an annual average of 2.2%, ahead ofGDP at 1.9%. The total value of transport and communications GDP will rise to US$29.6bn in nominalterms by 2013, 12.5% of GDP. The sector employed 486,000 people in 2008. We see this rising to530,000 by 2013. In common with Israel’s entire economy, the freight transport industry’s future depends on theresolution of the current long-term struggle with the Palestinians. Withdrawal from the Gaza Strip wasonly a start towards the eventual normalisation of relations, and as the new military operations in early2009 showed, security risks will continue in the forecast period. Israeli action to cut off the Gaza Stripshows the issue remains as volatile as ever. Tension has also been high with Iran, and political riskfactors remain ever-present. After years of under-investment, the logistics sector appears to be gettingmore top-level support, despite continuing fiscal constraints. At the same time, the privatisationcampaign and public-private partnerships have been pursued and may be given further impetus by thenew government, partly to bring in outside capital and partly to engender more competition. Although our road-haulage projection is based on estimates, we expect moderate expansion, rising byan annual average of 1.8% per annum in 2009-2013. We believe freight carried by rail will grow by asimilar annual average of 1.8%. Air freight will expand by 2.0%, a modest figure when compared tomore general trends in global aviation markets. Israel scores above the regional average in the freightrating, with a composite score of 60.2 (out of 100). Its strengths lie in the regulatory and competitiveenvironment and its transport infrastructure growth. In contrast to its peers, it is weak in actual freightgrowth and in the transport intensity index - a measure of the dynamism of foreign trade. Table of Contents
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