BMI View: Within a turbulent economic and political climate, Greek ports and shipping continue to show resilience as they focus on their roles as regional gateways and transhipment hubs rather than relying on domestic demand. We forecast positive growth at the ports of Piraeus and Thessaloniki in 2015 and the medium term. The new government is attempting to have investment committed to the ports as part of privatisation agreements and is also targeting Greek ship owners with new taxation scheme propositions. Adding to these considerations, early elections to be held in September create a greatly volatile market.
The port of Piraeus remains the leading Mediterranean container hub and diversification strategies implemented by COSCO, which operates two of its terminals, have helped the port establish itself as a transhipment hub and delinked it from domestic market downturns. Privatisation of up to 67% of the port's shares will also mean EUR300mn in investments in the port within the next five years, according to the suggested terms of the current government. Development projects in the pipeline include dredging work, rail link improvements and storage for bulk materials. The port of Thessaloniki, which has recorded growth in volumes handled in the first half of 2015 compared to 2014, will also benefit from similar privatisation terms. The port plans to develop new sites at the container terminal and additional storage for cargo amongst other projects. Economic growth forecasted for Thessaloniki's trading partners of Serbia, Macedonia, Albania and Bulgaria also support trade volume forecasts for the port. However, stricter taxation around ship owners based in Greece may harm activity levels in Greek ports if companies choose to relocate as a result of these taxes being rolled out. Nonetheless, BMI believe that the country's favourable location will help it retain trade volumes.
Headline Industry Data
In 2015 tonnage throughput at the port of Piraeus is forecast to grow 2.55% to 14.36mn tonnes; over the medium term to 2019 we project average annual growth of 3.23%.
2015 port of Piraeus container throughput forecast to grow 10.0% to 3.94mn 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 2.3% to 14.74mn tonnes in 2015, and average an annual expansion of 3.0% through to 2019.
Port of Thessaloniki box traffic is forecast to gain 4.43% in 2015 to 364,996TEUs, and to average 5.45% annual growth up to 2019.
2015 total trade growth forecast at 3.5%, up from -1.77% in 2014
Key Industry Trends
Privatisation O f Greek Ports Underway
In August 2015, the deadlines for bid submissions by potential buyers of the ports of Piraeus and Thessaloniki were set. Similar conditions will apply to bidders of both ports. 51% of each ports' shares are up for sale and another 16% can be purchased by the winning bidder within five years if port investment of an agreed sum is completed. For the port of Piraeus, which has an earlier submission deadline (October 2015), this sum is set at EUR300mn. The port of Thessaloniki's deadline is for February 2016. Initial plans suggested the direct sale of 67% of shares but this was revised by the current government. Early elections scheduled in September 2015 could mean a further revision of privatisation terms before the set deadlines. Contracts requiring investment spending will have a positive impact on the future of the ports and the Greek shipping industry, with developments projects already lined up for both ports.
Political A nd Economic Instability
Greece has faced economic problems for a number of years but 2015 has been a year with rapid developments both on an economic and political front. The new left-wing government of Syriza had committed to change bail-out terms and seemed willing to exit the EU otherwise. Such occurrence would harm trade volumes in Greece and although fears of a Grexit reached an alarming state, an agreement was reached. In the process of this, capital controls did also affect the shipping industry as Greek shipping companies with savings only in Greek bank accounts had problems meeting their financial obligations. This was of an issue for smaller companies. Ship owners also faced problems in buying fuel for ships that forced a number of ships to remain in Greek ports. The new government also aims to increase tax gains from higher earners in Greece, including ship owners. New taxation schemes that would make a Greek based shipping company's expenses higher, could lead to them relocating to countries with more favourable tax parameters. The shipping industry has, however, remained strong in this environment, driven by the better economic conditions of trading partners and transhipment port services.
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. We forecast that Greece will be stuck in recession in 2015. The new bail-out agreement reached provides some stability but early elections scheduled for September 2015 do create uncertainty in what government policies on taxation and privatisation will be. Markets will remain extremely volatile in the meantime.