BMI View: The outlook for Greek ports and shipping has deteriorated since our last quarterly report, as the government engages in brinkmanship over its debt negotiations and sends confusing signals over the fate of the port privatisation programme. That said, Greek seaports and Piraeus in particular, are to some extent protected by their role as regional gateways, linked to European transit trade demand. We have become more pessimistic over throughput at Piraeus, but we still see positive growth both there and at Thessaloniki.
Since our last quarterly report the economic outlook for Greece has darkened. We have lowered our prediction for GDP growth in 2015 to 0.5% (down from 1.2% previously), which implies that the country's recovery (0.8% growth in 2014 after six years of recession) is beginning to waver. The problem, we believe, is that the new left-wing Syriza government is pursuing a policy of tactical brinkmanship over the country's debt negotiations with the main creditors, threatening radical moves and then backing down at the last moment. Whether this will succeed in gaining concessions is not clear, but it does seem to be rattling consumer and business confidence.
Economic sentiment peaked around August 2014 and has been trending down since. Retail sales peaked around October and have also been falling. Private consumption has been the main driver of the so-far modest economic revival, so the instability is taking a toll. In addition, an erratic policy on privatisation has worried investors and there is a growing liquidity crunch in the banking sector. However, we see only around a 25% chance of negotiations breaking down completely and leading to Greece leaving the eurozone in 2015. For the moment our core forecast is one of very low growth.
Headline Industry Data
In 2015 tonnage throughput at the port of Piraeus is forecast to grow 1.1% to 14.145mn tonnes; over the medium term to 2019 we project average annual growth of 2.9%.
2015 port of Piraeus container throughput forecast to grow 10.0% to 4.124mn twenty-foot equivalent units (TEUs); over the medium term, we project annual average growth of 11.0%.
Port of Thessaloniki tonnage is forecast to grow 2.1% to 14.71mn tonnes in 2015, and average an annual expansion of 3.0% through to 2019.
Port of Thessaloniki box traffic is forecast to gain 5.6% in 2015 to 369,086TEUs, and to average 5.7% annual growth up to 2019.
2015 total trade growth forecast at 3.5%, up from an estimated 0.35% in 2014.
Key Industry Trends
No But Yes On Privatisation: The Syriza government's policy on the privatisation of key ports and other transport facilities remains unclear. Formally, privatisation plans are under review. In January 2015 alternate minister for shipping and the Aegean Thodoris Dritsas had said the proposal to divest a 67% stake in the Port of Piraeus Authority (PPA) was being blocked. But in March Deputy Prime Minister Yannis Dragasakis, on a visit to China, said that Chinese firm COSCO Pacific, which already operates two terminals at the PPA, was an 'active participant' in the privatisation process and had made a 'very competitive' offer.
Yang Ming Announces Piraeus Plans: Taiwan's Yang Ming Lines said in May 2015 that it had agreed to use the COSCO Pacific-operated Piraeus Container Terminal (PCT) as a hub for feeder services to the Mediterranean and the Black Sea. Arkas Hellas, which represents the Taiwanese company, said a Yang Ming ship with 14,000TEU capacity had arrived at PCT and would be the first of 15 cargo ships to use the route. According to Arkas Hellas there will be four departures and arrivals a week to the most important ports of the Far East and two arrivals and departures to the biggest north European ports. At the end of May smaller Yang Ming ships were set to start using Thessaloniki to serve the transport needs of northern Greece as well as of the Balkan region.
Diana Shipping in Deal With Glencore Grain: Greece-based ocean freight services provider Diana Shipping, via a subsidiary, has signed a time charter contract with Netherlands-based Glencore Grain Rotterdam for one of its panamax dry bulk vessels, the M/V Melite, reported PortNews. The gross charter rate is USD7,250 a day, excluding a 5% commission paid to third parties, for a minimum period of eight months to a maximum of 12 months. The charter was scheduled to start on January 30 2015 and was expected to generate around USD1.74mn in gross revenue during the minimum period.
Risks To Outlook
Although the Greek shipping and ports sector has been relatively protected, given the uncertainty over the country's finances and the policies of the new government, risks to our outlook for the economy are substantial and weighted heavily to the downside. It is possible that Greece could be stuck in recession in 2015. However, our core view remains that Greece and its main creditors will come to an agreement on renegotiating the country's debt load, although the changes will be relatively limited (most likely extended debt maturities). Markets will remain extremely volatile in the meantime.