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Free AccessREPEAT: 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
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.