REPEAT: REALITY CHECK: After 2017 Spike, Trade Vols To Taper

Repeats Story Initially Transmitted at 15:48 GMT Dec 21/10:48 EST Dec 21

--Tax Reform Could Support 'Continued Healthy Growth' In Vols Next Year

--Increase in Passenger Cruising Helping US Port Revenues

By Vicki Schmelzer

     NEW YORK (MNI) - After spiking higher in 2017, trade volumes at U.S. ports

will likely taper off in 2018, said Moody's analyst Moses Kopmar, who spoke with

MNI in an exclusive interview as part of the REALITY CHECK series. 

     Moody's view is that the "strong loaded container growth of 4-5%," seen in

2017, will likely moderate to 2-3% in 2018, he said. 

     In terms of total TEU volumes for 2017, which includes both empty and

loaded containers, "most of the ports we're seeing are 6-7% total, and then if

you strip out the empties, it's a little bit lower - but certainly robust,"

Kopmar noted.

     --DIVERGENCE FROM GDP

     In 2017, the symbiotic relationship between U.S. container volumes and real

U.S. GDP that has been seen in recent years, diverged, with volumes more than

outpacing GDP. 

     "The growth we saw this year was divorced from the underlying

fundamentals," he said. 

     The rapid rise in container volumes was driven by stronger global growth as

well as a positive turnabout in U.S. sentiment. 

     "We think part of that was the increase in business and consumer confidence

in the U.S., which really surged following the elections - that drove obviously

confidence, hiring and investment decisions," Kopmar said. 

     Moody's looked for "some moderation" in loaded container volumes in 2018,

with scope for an upside surprise.

     "As long as the economic recovery continues intact and, if you add in some

additional stimulus from some of the tax reform, that could certainly support

continued healthy growth" in volumes, he said.

     --TAX REFORM IMPACT UNCLEAR 

     The effect of U.S. tax reform is difficult to assess. "There is going to be

some economic stimulus certainly," although this is "countered a little bit by

the trajectory of monetary policy, which is becoming a little more restrictive,"

Kopmar said. 

     Moody's looked for the U.S. economy to grow at 2.3% in 2018, "a bit faster"

than the 2.2% estimated for 2017, and projected that the global economy will

continue "at a solid pace of 3.2% in 2018." 

     But, even if the U.S. economy cools somewhat, if other global economies

remain in recovery mode, U.S. ports should still benefit, he said. 

     "The U.S. does have valuable exports in agriculture. In the Gulf, there's a

big petrochemical/natural gas-related manufacturing production boom occurring.

The U.S. does export automobiles and capital equipment," Kopmar said.

     "To the extent that other counties are seeing their economies expand and

their demand strengthen, the U.S. is going to participate in that," he said. 

     --RANGY OIL PRICES TRIM COSTS

     Moody's assumes that Brent and West Texas Intermediate crude oil will hold

a $40-$60 range in 2018, with low oil prices keeping transport and supply chain

costs lows. 

     Should crude prices rise above $60 on a sustained basis, "we would have to

look for how that would be affecting fuel costs for ocean carriers and railroads

and truckers."

     "And, also higher oil can squeeze the U.S. consumer and the U.S. economy,"

Kopmar said. 

     --CRUISE VOLUMES GOOD NEWS 

     Passenger cruise volumes, like container volumes, have been in an uptrend

and should "remain healthy in 2018," Kopmar said. 

     This is important for U.S. ports given that "the U.S. is by far the largest

global market for cruise travel and cruise is a high margin business that

contributes more than 10% of total revenues" to U.S. ports.  

     The Cruise Lines International Association (CLIA)'s latest 2018 Cruise

Industry Outlook, released earlier in December, estimates that 27.2 million

people will take a cruise in 2018, compared to an projected 25.8 million in 2017

and compared to 24.7 million in 2016. This is a far cry from 17.8 million cruise

passengers seen in 2009 at the height of the global financial crisis and the 15

million passengers seen in 2006, pre-crisis. 

--MNI New York Bureau; tel: +1 212-669-6438; email: vicki.schmelzer@marketnews.com