April 10, 2010 -
PRLog -- According to a Globes report in September 2009, Israel Corporation (Israel Corp) was to hold a special shareholders meeting on October 14 2009, to discuss strategies to help Zim Integrated Shipping Services. Israel Corp expects its subsidiary company to face financial instability in 2009 and 2010, with a gradual improvement starting in 2011. Zim is unsure whether it can pay its debts on time and is asking creditors for concessions. The company expects to register a cash flow deficit of nearly US$1bn between 2009 and 2013. The dire situation facing Zim was illustrated in the company's recently-released H109 results. Revenue for H109 stood at US$1.165bn, down 47% from H108's revenue of US$2.213mn. Like all container lines, the company was hit by the decrease in global trade volumes and the decline in freight rates. Zim is one of the 20 largest container shipping companies in the 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 an upward revision. We now predict a 2009 GDP contraction of 0.9% (was -1.9%) and expect growth of 2.4% (no change) in 2010. For 2009-2013, economic growth will be an annual average of 1.9%, below the much more robust 5.5% average registered over the preceding five years. The effect on our freight traffic forecasts for the period, compared with the earlier one, is therefore quite sharply negative. We continue to make adjustments to our mode-specific estimates and forecasts, cutting back maritime freight growth because of the global recession in 2009, the downturn in the shipping cycle, and the difficulties facing Zim Integrated Shipping. The big road-building programme may meet fiscal constraints. We have trimmed back rail freight based on the available published data. The spike in energy costs in Q308 followed by the slump in freight demand in Q408 and 2009 has been a difficult combination to handle for the air freight, road haulage and shipping sectors in particular. Taking all these factors into account, our forecasts for freight carried across all modes and measured in mntkm is now 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 little ahead of overall GDP which rose by 5.5%. For 2009-2013, we now expect the sector to grow a little faster than the wider economy. It will expand in value terms by an annual average of 2.2%, ahead of GDP at 1.9%. The total value of transport and communications GDP will rise to US$29.6bn in nominal terms by 2013, 12.5% of GDP. The sector employed 486,000 people in 2008. We see this rising to 530,000 by 2013. In common with Israel's entire economy, the freight transport industry's future depends on the resolution of the current long-term struggle with the Palestinians. Withdrawal from the Gaza Strip was only a start towards the eventual normalisation of relations, and as the new military operations in early 2009 showed, security risks will continue in the forecast period. Israeli action to cut off the Gaza Strip shows the issue remains as volatile as ever. Tension has also been high with Iran, and political risk factors remain ever-present. After years of under-investment, the logistics sector appears to be getting more top-level support, despite continuing fiscal constraints. At the same time, the privatisation campaign and public-private partnerships have been pursued and may be given further impetus by the new 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 by an annual average of 1.8% per annum in 2009-2013. We believe freight carried by rail will grow by a similar annual average of 1.8%. Air freight will expand by 2.0%, a modest figure when compared to more general trends in global aviation markets. Israel scores above the regional average in the freight rating, with a composite score of 60.2 (out of 100). Its strengths lie in the regulatory and competitive environment and its transport infrastructure growth. In contrast to its peers, it is weak in actual freight growth and in the transport intensity index - a measure of the dynamism of foreign trade.
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