Following a year that saw increasing volumes across all modes of Kazakhstan's freight transport sector, BMI believes 2015 will signal further growth in line with the country's macroeconomic outlook.
Total trade is projected to pick up with our Country Risk desk forecasting a year-on-year (y-o-y) increase of 6.4% in 2015 following an estimated growth of 5% in 2014.
The most potential for growth and development in Kazakhstan's freight transport sector remains in the country's rail freight market. The country's exports are concentrated on the freighting of bulk products, namely oil and grain. The country's rail freight sector has developed to cater for these needs and will continue to do so in the longer term, as both commodities look set to continue dominating Kazakhstan's trade sector.
Rail freight is also in high demand as Kazakhstan develops its role as a conduit for freight shipped by land between Asia and Europe. The country is playing a role in the development of the Asia-Europe landbridge, a route linking China to Europe via rail.
Road freight is to continue to dominate the sector and is projected to grow by 11% in 2015.
Headline Industry Data
2015 Air freight tonnage is expected to grow by 5.5%
2015 Rail freight is forecast to grow by 4.0%
2015 Road freight is forecast to grow by 10.7%
2015 Inland waterway freight is forecast to grow by 2.9%
2015 Total real trade growth is forecast at 6.4%.
Key Industry Trends
Kazakh Rail Freight Steams Ahead With Two New Lines: The launch of two new railway lines in Kazakhstan supports our view that rail transport will be the key driver of growth and development in the country's freight transport sector. Moreover, the new railway lines will significantly boost the country's role as a conduit for regional trade. It is a significant development for the country's transport network, increasing the total length by 1,200km and reducing transit times to neighbouring states, with around 1,000km cut from the east-west route.
NYK To Capitalise On Silk Road Trade Boom : Japanese shipping group Nippon Yusen Kaisha (NYK)'s acquisition of the Kazakhstan car terminal Tranco Terminal is a solid strategic move. The terminal's intermodal transport links and integration with the main rail networks will facilitate NYK's desire to be more involved in the overland distribution of the cars and will also allow NYK to capitalise on the burgeoning freight boom seen in Kazakhstan due to its key location on the Asia-Europe landbridge.
Risks To Outlook
Kazakhstan is set for a period of solid, if not spectacular, real GDP growth in the years ahead, helped by private consumption, which is set to remain the primary driver of growth, with oil production also maintaining its key position in the economy despite subdued global prices and declining output. Real GDP growth is expected to increase to 4.8% in 2015, as agricultural exports to East Asia pick up on the back of changing consumer preferences in the region, providing a boost to net exports. At the same time, although Russia only accounts for around 10% of total Kazakh exports, the sharp devaluation of the Russian rouble in H214 will undoubtedly see demand for Kazakh goods decline. These factors will affect not only both Kazakhstan's exports and imports, but by extension the strength of demand for freight transport.
The risk to the downside for Kazakhstan is its exposure to Europe. The region's recovery will remain slow in 2015 and Kazakhstan has become more tied to this area's demand requirements as it expands its role as a conduit for trade between Asia and Europe.
Also, all states in Central Asia rely heavily on exports to China to fuel economic growth, and while our Asia country risk team holds to the view that economic activity in China will moderate in the coming years, if this slowdown proves deeper than expected it would have a strong effect on Central Asian economies and their freight transport sector.
In addition, if we see a collapse in global commodity prices it would have a severe impact on the economies of Central Asia. A sharp decline in the cost of oil, natural gas, aluminium, gold or cotton would have a severe impact on growth prospects and would result in downgrades to our growth forecasts and forecasts for freight transport volumes.