Egypt Freight Transport Report Q3 2012

Egypt's freight transport sector has been characterised by strikes and other industrial actions in recent months, a fairly common occurrence since the ouster of President Mubarak in March 2011.These have occurred across all freight transport sectors: road, rail, air and ports. BMI believes that the more commonplace these become, the bigger the impact they will begin to have on the Egypt's economy, as a fully functioning freight transport sector is essential for economic growth.

BMI is maintaining our Egypt GDP growth forecast from last quarter of 2.1% year-on-year (y-o-y) in FY2011/12 (fiscal year running from July-June), before ticking up to 4.9% in FY2012/13. The outlook is improving, though there remain significant political tensions - not least from the Muslim Brotherhood announcing that its political wing, the Freedom and Justice Party, would be fielding a presidential candidate after all. The potential for further political unrest remains, though the election for the lower house of parliament was considered broadly successful, particularly as worst-case fears of a potential return to large-scale violent unrest alongside the one-year anniversary of the revolution in January 2012 proved unfounded.

Headline Industry Data

Air freight handled at Cairo International Airport is set to grow by 3.4% y-o-y in 2012 to reach 297,040 tonnes. Over the medium term to 2016 growth will average 3.5% per annum.

Cargo carried by rail will remain sluggish, with expansion of just under 1% to 11.99mn tonnes.

Total tonnage throughput at East Port Said is forecast to grow by 6.8% to 29.76mn tonnes in 2012, and to average 11.7 % per annum to 2016.

Real growth in total trade is forecast at 4.6% in 2012 and to average 8.5% in the medium term. Key Industry Trends Clashes Near Libyan Border In April 2012, two protesters were killed and more injured in clashes with the Egyptian military that took place near the Libyan border over increased road tolls. Road charges for commercial vehicles were increased from EGP450 to EGP600 per vehicle, and hundreds turned out to block the roads to protest.

Disruptions At Cairo Airport Cairo airport has been the scene for frequent strikes since the Arab Spring came to Egypt, eventually resulting in the ouster of President Hosni Mubarak. These appear to have subsided for now. However, the facility was struck by sandstorms in April that prevented a number of flights from landing at the airport.

These continued interruptions to cargo services at Cairo International will impact on its throughput and finances, in addition to those airlines, such as EgyptAir, which operate out of the facility.

Potential Investment By Maersk To Take Advantage Of Continued Canal Traffic Growth BMI believes that Danish shipping conglomerate AP Møller Maersk must have confidence in East-West trade through the Suez Canal if the company's reported plans to invest heavily in developing its transhipment hub at the waterway's mouth come to fruition.

Key Risks To Outlook The main risks to our forecasts for Egypt remain to the downside. Should the country be racked by another wave of political unrest, which remains distinctly possible at this stage, volumes in Egyptian freight transport could see a contraction like that experienced at the country's ports in 2011, or across the sector when the downturn hit in 2009.