BMI View: The Port of Varna is positioned to enjoy an impressive year of growth with tonnage set to be the outperformer , forecast t o increase by 14.00% year-on-yea r (y-o-y ), while container throughput is also pencilled in to enjoy healthy growth of 7.00% y-o-y. The ongoing cyclical recovery in the eurozone will support Bulgarian export growth over the coming quarters, as Germany and Italy receive over 20% of Bulgarian exports, hence our forecasts.
In addition, although we maintain that the lev is overvalued, euro depreciation has meant that the lev has also depreciated considerably against major currencies over the course of 2015. As a result, exports to non-EU countries increased by 10.4% y-o-y between over the first five months of 2015, underpinning the healthy shipping forecasts we anticipate over the short term.
Russian demand for exports as the Russian economy remains in contraction, but Bulgaria's wide array of export destinations (and types of good exported) has enabled it to weather this storm, which is welcome news to domestic shippers who will thrive due to the diversification.
Headline Industry Data
2015 port of Varna tonnage throughput forecast to grow 14.00% to 14.70mn tonnes; over the medium term (to 2019), we project an average annual increase of 4.82%.
2015 port of Varna container throughput forecast to grow 7.00% to 141,920 twenty-foot equivalent units (TEUs); over the medium term, we project a 4.66% average annual increase.
2015 total trade growth forecast at 1.80%, down from an estimated 3.03% in 2014.
Key Industry Trends
Winds Close Varna: Due to strong winds around the coastal city of Varna, a decision was made to close all ports and channels at the seaport, reported Focus News Agency at the end of May 2015. This development, coming, as it did, as a result of gale force winds, may result in our forecasts being slightly tweaked in the near future as throughput dropped slightly.
Navibulgar Buys New Vessel: Navibulgar has added a new vessel to its fleet with its maiden voyage calling at three Chinese ports before moving on to the Mediterranean, it was reported in June 2015. The ship, built at the Chengxi Shipyard Jiangyin in China, is one of four bulk carriers ordered by Navibulgar from the Chinese yard and a fifth and sixth are set to follow at some point.
Bulgaria And Israel Ink Shipping Deal: A commercial shipping agreement has been signed by Bulgaria and Israel as the two countries looked towards growing their burgeoning relationship, Focus Information Agency reported in July 2015. Bulgarian Minister of Transport, Information Technology and Communications Ivaylo Moskovski and Israeli Ambassador to Bulgaria Shaul Kamisa Raz signed the deal at the Ministry of Transport, Information Technologies and Communications, with Moskovski stating: 'The agreement has a high added value for the relations between the two countries. We have great relations in the field of aviation and land transport. I hope that this agreement will be a good groundwork for further development of our trade relations.'
Key Risks To Outlook
In terms of net exports, we do not believe that an export-led recovery is on the cards in Bulgaria despite increasing growth momentum across the EU (Bulgaria's main trade partner). Firstly, we believe the exchange rate is uncompetitive, which will cap export growth. Secondly, improving domestic demand will boost imports. Both these factors will ensure that net exports remain a drag on growth. Our forecasts see net exports subtracting 0.1 and 0.2 pp from headline growth in 2015 and 2016.
Greece is one of Bulgaria's key export partners and so is a key component in the shipping sphere. Grexit contagion risks would be relatively limited for most of Europe, with systemic risks posed to the eurozone much lower than was potentially the case during the 2010-2012 crisis. Economies in South-East Europe have the most to lose from Greece abandoning the currency union. However, eurozone aside, those with geographical proximity to Greece in South East (SE) Europe are most at risk from a Grexit, namely Bulgaria, Albania, Serbia and Macedonia.