BMI View: We forecast total tonnage growth of 4.8% at the port of Manzanillo in 2015, to 29.9mn tonnes. For the port of Veracruz, total tonnage growth is forecast to be 3.5%, reaching 20.5mn tonnes.
Mexican economic activity will pick up in coming quarters, as private consumption continues to recover from a weak 2014 and manufactured goods exports to the US continue to grow. We remain optimistic toward Mexico's shipping sector on the back of a booming manufacturing sector, an increasingly strong private consumer and favourable demographics The construction sector, especially the residential segment, will also continue to recover from an 18-month recession that ended in June 2014, further contributing to stronger real GDP growth this year. A contraction in oil exports and a reduction in fixed public investment will be the main headwinds for the economy, though they will not be enough to derail an acceleration in real GDP growth. We forecast real GDP growth of 3.3% in 2015 and 3.5% in 2016, up from 2.1% in 2014.
Imported container volumes will be boosted by growing private consumption levels. Household spending will be stronger, bolstered by declining unemployment and to greater consumer confidence. Stronger activity in the manufacturing and construction sectors, both important generators of formal employment, will be the main drivers of lower unemployment. The unemployment rate has already been trending lower, coming in at 4.5% in February 2015, compared to 4.9% a year earlier. We forecast unemployment to average 4.4% in 2015, down from 4.8% in 2014. Partly as a result of more favourable labour market dynamics, consumer confidence has been picking up.
A strengthening US consumer, boosted by cheap fuel prices, will be the main driver of an expansion in manufactured goods exports, especially of autos, bolstering volumes at Mexican ports. A weak peso will further bolster the competitiveness of manufactured goods exports. Import growth will be lower than the expansion in exports, mainly due to the weak peso. We forecast real goods and services imports growth of 6.8% in 2015 and 6.4% in 2016, compared to 5.7% in 2014.
Headline Industry Data
Port of Manzanillo total tonnage growth in 2015 forecast to be 4.8%, reaching 29.9mn tonnes.
Port of Veracruz total tonnage growth in 2015 forecast to be 3.5%, reaching 20.5mn tonnes.
Mexico's trade real growth is forecast at 7.3% in 2015.
Key Trends And Developments
TPP To Boost Mexico's Shipping Volumes
BMI believes the Trans-Pacific Partnership (TPP) trade deal will boost the rapidly expanding maritime trade flows between Asia and Latin America, as well as reviving the transpacific trade route between North America and Asia. With signs that an agreement could be reached as early as the end of 2015, the TPP poses upside risk to our shipping transport forecasts for Mexico. The TPP agreement is currently being negotiated by 12 countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam) and covers everything from agriculture to pharmaceuticals.
Major Port Investment Planned
The government is investing USD5bn into its network of 117 ports, as Mexico rises in importance as a regional manufacturing centre. President Enrique Pena Nieto is pushing forward 25 new projects, including an expansion at the port of Veracruz. The projects are part of the government's broader approach to managing and expanding Mexico's ports network as a whole. The government would like to move away from a situation where ports compete for business with each other. According to Guillermo Ruiz de Teresa, general coordinator of Mexico's ports and merchant marine fleet, the government's new approach will 'consolidate' ports into two groups: Pacific Coast and Gulf Coast.
Significant Expansion For Veracruz
The port of Veracruz is neither Mexico's largest nor its busiest container port, but the government has designated it one of the most important facilities, and is investing considerably in the facility. Expansion at the port will increase its capacity to 88mn tonnes, adding 35 new berths, two new turning basins, a logistics attention centre for ground transport and a 19.5km double-track railway bypass.
Risks To Outlook
The Mexican economy remains highly dependent on that of the US. Mexico's real GDP growth will accelerate, driven by an improvement private consumption, stronger growth of manufacturing exports, and a recovery in public investment. We expect an uptick in private fixed investment into the recently liberalised energy sector, as the first oil licensing round begins in H115.
Downside risks to our growth outlook for Mexico have intensified. A series of weak labour market and manufacturing data from the US in Q115 could lead to lower demand for Mexican manufactured goods exports than we expect.
A deteriorating security environment also poses downside risk to our growth outlook. Violence could spread in the country and concern investors. Under such a scenario, the exchange rate would be under pressure, which would weigh on household spending.
Upside risk is presented by the government's plans to invest USD783.1mn in the maritime sector in a bid to develop new infrastructure at six ports. This investment is badly needed, as Mexican ports suffer from an ongoing infrastructure deficit.