Abstract
Freight rates for shipping liquid petroleum gas (LPG) by tanker from the Middle East to Japan continued
to plunge in October. According to Platts Commodity News they fell to below US$30 per metric tonne
from the middle of the month, down from record highs of US$82/mt in July. The drop contradicted earlier
forecasts by traders who had said they expected the rates to stabilise at the US$30 level for the rest of
2008. 'In summer, there were at least six cargoes a month from the Middle East, but after these ships
returned to the Persian Gulf, the shipping market just collapsed' a very large gas carrier (VLGC) ship
broker was quoted as saying. A Hong Kong based VLGC broker said he expected the Baltic Dry Index to
drop even further. The fall was attributed to a combination of low demand and increased shipping
capacity. Going forward, we expect the global economic slowdown in 2009/10 to take its toll on Japanese
shippingThe latest BMI Japan Freight Transport Report now forecasts average annual growth of freight
carried by sea at 2.0% over the 2009-2013 five-year forecast period.
Our Japanese shipping forecast is based on various factors. Among them, the Japanese recovery seems to
be going into reverse. We forecast average annual GDP growth of 1.5% over the next five years, after
2.0% in the preceding five. Second, the industry is mature and facing a global oversupply problem for the
next couple of years. While Japan's growing trade with China is a positive, the fundamentals still point to
some rather tough years ahead.
In the current climate we are also relatively cautious over freight turnover forecasts for other transport
modes. Fuel prices and safety concerns are holding back airfreight, but Japanese airports have reduced
their very high landing fees. Road freight is expected to see lower fuel prices, but demand will be
disappointing. As a result of these adjustments, we now expect average annual growth in total freight
turnover to be 1.6% over the 2009-2013 period. The operating environment is good, but not spectacular.
Japan has a composite score of 62.8 out of a potential total of 100.0 in our freight transport rating. Japan
scores highly for long-term economic and political risk, transport infrastructure growth and for the
regulatory and competitive environment. But its overall score is lowered, due to weaker performances for
freight growth and on the transport intensity index, which is a measure of foreign-trade dynamism. This is
not unusual for a more developed economy like Japan, where growth rates are much more moderate.
According to our latest estimates, the total value of transport and communications GDP will rise to
US$321.6bn in nominal terms by 2013, representing 6.3% of Japan's GDP. The transport and
communications sector employed 4.03mn people, or 6.3% of the labour force, in 2008. We see the first
figure falling to 3.79mn by 2013, while as a proportion of the total labour force, employment in the
industry will continue at the 6.3% level.
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