Our outlook for the Colombian freight transport sector remains broadly positive, despite a moderating macro-level view. There are encouraging signs of badly needed investment in transport infrastructure, both in the country's ports and in the freight transport infrastructure that feeds them, on the back of the country's developing mining sector. However, progress on such projects is often delayed, and BMI cautions that bottlenecks may remain a problem for some time.
We believe Colombia is undergoing a moderate shift in the country's shape of growth, characterised by a slight slowdown in private consumption. On top of this, the recent downgrade to our global growth and oil price outlooks suggests demand for Colombian exports will fall slightly below our initial expectations.
As a result, we have revised down our 2013 real GDP growth forecast from 4.4% to 4.3%. Despite this, consumption will remain at relatively strong levels, and a positive investment outlook for the mining, petroleum and infrastructure sectors will ensure Colombia enjoys more than 4.0% growth over the coming years, boding very well for volumes at the country's container ports, as well as dry and liquid bulk facilities.
On the downside, oil is the country's main export (48.9% of total goods exports in 2011), and our Oil & Gas team's recent downgrade to our average Brent crude oil price outlook to US$102 /bbl for 2013, suggests global demand for oil will weaken next year.
However, on the coal side, the outlook remains positive. Colombia's coal exports have ramped up in recent years, experiencing 39.6% growth in 2011. We anticipate further increases over the medium term, as the planned US$1.3bn investment into the Cerrejon coal mine by 2015 will help boost production.
Given Colombia's still-substantial infrastructure deficit, we expect investment into infrastructure and freight transport related to the export sector will continue to grow in 2013. This comes as both the government and private companies look to decrease supply chain inefficiencies and increase the country's export capacity from both the Caribbean and Pacific coasts.
Headline Industry Data
- The Port of Cartagena will see total tonnage volume increase by 8.9% to 15.5mn tonnes in 2013.
- Volume at the Pacific port of Buenaventura will be up by a more restrained 2.9% to 9.7mn tonnes.
- Air freight volumes (tonnes/km) will increase by 8.1% in 2013, with average annual growth of 8.6% during our forecast period to 2017.
- Road freight volumes (tonnes/km) will increase by 7.2% in 2013, with average annual growth of 7.8% during our forecast period to 2017
Key Trends and Developments
Coal Remains Driving Force Behind Colombian Freight Transport
Colombia remains one of the world's top five coal exporters. With output growing and demand remaining steady, we expect the country to continue exporting large volumes of coal, particularly to the US and Europe. As such, much of the investment in the country's freight transport sector is driven by the need to transport coal. In 2012 BMI highlighted ongoing investments, both domestic and international (from China and South Korea), in Colombia's main coal handling ports and railways.
BMI expects Colombian coal output to double to 140mn tonnes per annum by 2015 as investment pours into the sector. With this growth in production, we expect the mining sector to increase its share of GDP gradually from 7% in 2010 to approximately 10% by 2015. However, such rapid growth in production means that considerable investment in infrastructure will be needed to enable the country's transport infrastructure to handle the increasing output. Given that Colombia's freight transport infrastructure has long been underfunded and underdeveloped, we expect efforts to bring it up to standard to continue over the medium term.
Risks To Outlook
Colombia suffers from an infrastructure deficit because its economic development has far outpaced investment in its infrastructure. This needs to be rectified if the country is to handle its increasing mining output.
A second downside risk comes from the possibility of a hard landing in China. This would result in reduced demand from the Asian country for the raw materials and minerals which Colombia exports.