BMI View: The strong growth registered across Colombia's main ports in 2014 is set to continue over the course of 2015. The largest port in the country at Cartagena is set to see the largest rate of year-on-year (y-o-y) tonnage throughput growth in 2015, with healthy gains of over 7%, while the second main port in Colombia, at Buenaventura, will be the outperformer in terms of container throughput growth (4.75%). That said, these forecasts are down on the estimated growth seen in 2014. Our forecasts are predicated on the fact that Colombian real GDP growth will slow dramatically in 2015, as the impact of weaker oil production and lower oil prices weighs on trade dynamics and undermines consumer confidence.
In the coming year, the deterioration of Colombia's oil sector will weigh on investment inflows and swing the goods trade position into its deepest deficit in more than two decades. Thereafter the outlook will brighten slowly, with a flexible exchange rate regime, improvements in transport infrastructure, which we envisage boosting the port sector going forward in terms of an enhanced supply chain and a reduction in security risks encouraging a gradual rebalancing of the current account and boosting foreign direct investment.
Headline Industry Data
The port of Cartagena will see total tonnage volume increase by 7.71% to 22.92mn tonnes in 2015 and will average growth of 5.90% to 2019.
Container traffic at Cartagena will grow by 3.00% to 2.28mn twenty-foot equivalent units (TEUs) in 2015. Growth to 2019 will average 5.66%.
Tonnage volume at the Pacific port of Buenaventura will rise by 3.31% to 12.14mn tonnes in 2015, while container traffic will rise by 4.75%, to reach 699,179TEUs.
Key Industry Trends
APL Introduces New Service To Link Central America With US East Coast - On May 20 2015, APL introduced a new weekly shipping service aimed at expanding its network coverage in the Americas. The new service, dubbed the America Caribbean Express (ACX) will be operated through a vessel sharing agreement with SeaLand. The service will employ three vessels of 1,700 twenty-foot-equivalent units (TEUs) capacity each and provide direct service with fixed day arrivals from the Central American countries of Colombia and Panama to the US East Coast. The port rotation for the ACX service will be Manzanillo - South Florida - New York - Philadelphia - Savannah - South Florida - Cartagena. The service, subject to regulatory approvals, is expected to begin in late-June or early July, reported AJOT.
Oil Prices to Weigh on Port Volumes - While oil production has been the major driver of Colombia's goods trade dynamics, accounting for around half of the country's goods exports in recent years, it will no longer be able to support robust export growth in the years ahead, once again putting pressure on the country's shippers. Oil prices plunged in H214 and our Oil & Gas team expects crude prices to remain structurally lower in the years ahead on the back of an oversupplied global market. The ramifications of the weaker prices will only be exacerbated by falling production, with a continued spate of disappointingly small discoveries having undermined investor confidence in the country's below-ground prospectivity (see 'Oil Prices In Long-Term Decline' February 25).
Drugs Bust At Buenaventura - The impact of drugs in Colombia continues to impact the port of Buenaventura as criminals look to use the facilities to transport their narcotics. In June 2015, Colombian police allied with Interpol seized some 1.5 tons of cocaine at the port, worth around USD45mn. According to Colombia Reports: 'The police said the shipment was intended to be shipped to Mexico, after which the cocaine would be shipped to Europe.'
Key Risks To Outlook
Colombia's trade dynamics will become more challenging in the coming years, with net exports climbing to nearly 12% of GDP. Oil exports (representing more than half of total goods exports in 2014) will remain in terminal decline in the coming years. The country's persistently small reserve discoveries will temper investor enthusiasm for the country's hydrocarbon acreage - especially in the current low oil price environment - translating into a sustained fall in crude production (see 'Production Rally Has Little Room To Run' May 15). Meanwhile, significant structural obstacles, ranging from high electricity costs and poor transport infrastructure will stymie non-oil exports. The government has begun taking steps to bolster the country's competitiveness as a manufacturing destination, not least the 4G transport expansion programme. However, the effects are only likely to feed through slowly. In the meantime, with import growth beginning to reaccelerate toward the latter part of the forecast period, this will see the country's net export picture coming under increasing pressure.
Moreover, we see little to offset the plunge in oil exports. While the sharp depreciation of the Colombian peso will offer some tailwinds to the cost competitiveness of the country's non-oil exports, this will be insufficient to prompt a rapid rebalancing of the export sector. Rather, structural obstacles, ranging from high electricity and non-wage costs to insufficient infrastructure (see 'Structural Obstacles To Hinder Manufacturing Sector Revival', December 5 2014) will undermine the country's efforts to diversify its export basket. The government has taken a number of steps to address these weaknesses, including efforts to expand transportation and reduce labour market rigidities. However, these reforms will only feed through to a gradual strengthening of the country's trade dynamics over the course of our forecast period.