Thursday, May 27, 2010

Qatar Shipping Report Q3 2010 - New Market Report Published

The merger of two of Qatar's top shipping companies has been completed, and they are now changing gear to cope with the change from recession to impending boom. Qatar Navigation has acquired Qatar Shipping (QShips); both companies are ultimately government-owned and the merger was Doha's response to the 2009 recession. In practice however, the new merged company is positioned to play offensively, rather than defensively, as rising oil and gas revenues put Qatar on an accelerated growth path in 2010. The merged company has reported a first-quarter profit of QAR554.59mn (US$152.46mn) in Q110. More good results can now be expected as oil, LPG and LNG exports, and consequently demand for tankers, begin to surge forward. In a press statement Qatar Navigation asserted that the merger had established 'clear leadership in the Qatari market and the potential to become a major regional player with a firm basis to establish and grow its presence in international markets'.

The macroeconomic environment in which Qatar's shipping and ports sector operates is changing rapidly. After the bursting of banking and real estate bubbles last year, with the associated worries, 2010 presents itself as a particularly sharp V-shaped recovery. With GDP surging ahead, the issue now is how to deal with the problems of growth. We expect the economy to grow by a massive 15.4% this year, followed by double-digit growth again in 2011 (GDP will rise by 10.4%). Gas production, most of which needs to be exported by sea on gas tankers, is forecast to increase at an average annual rate of 11.4% over the next five years.

Cargo volumes handled in Qatar's Port of Doha and in its successor, (currently under construction) the New Port of Doha, are set to grow very strongly. As the Qatari authorities do not publish detailed cargo statistics, and have not said much about the phasing of the move to the New Port of Doha, we are making the broad prediction that volumes over the next five years will grow at annual average rate above GDP (expected to be 8.3%) and close to foreign trade (expected to be 12.1%). By 2014 we expect the number of containers handled at the Port of Doha to be up to 427,811 20-foot equivalent units (TEUs), while at the New Port they will have reached 106,953TEUs.

With a relatively small population and a very large and growing natural gas industry, Qatar is set to see very rapid trade growth. LNG exports will lead the way and deliver double-digit export expansion. In fact, this year alone we see exports rising by over 50% to US$73.6bn, while imports grow by 10% to US$27.7bn, generating a massive surplus. Large positive trade balances will be a marked feature of the next few years.

With such strong growth projections the risks to our ports and shipping forecast must lie on the downside, although in our view they are of no more than moderate probability. We highlight two risks. The first is the possibility of lower than expected oil and gas price increases, which would have the effect of cooling the growth in trade and volumes (note, however, that this depends on elasticities of demand, and arguably the developed economies' demand for LNG is price-inelastic). The second, and perhaps more probable, risk is that the proposed transition from the Port of Doha to the New Port of Doha is delayed or otherwise runs less smoothly than planned. This could quite significantly reduce cargo volumes because of the capacity problems at the existing port.

Qatar Shipping Report Q3 2010:

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