Exports are forecast to grow by just over 6% in 2015, down on the double-digit growth of 2014 (10.48%) which, nonetheless, should prove a boost to the country's shipping industry. In 2015, we expect to see a broadly similar situation as 12 months previous, with the Port of Busan once more leading the way in terms of year-on-year (y-o-y) tonnage throughput growth, while the Port of Incheon will lead in box terms.
In our view, the signing of the Korea-China free trade agreement (FTA) between the two close trade partners will benefit both parties, with the bigger portion of the economic benefits accruing to South Korea. According to South Korean government estimates, the implementation of the Korea-China FTA is expected to help boost annual trade volume between the two countries from USD229bn in 2013 to USD300bn in 2015. The agreement between Asia's fourth largest and largest economy is further expected to increase bilateral ties and further the currently warm South Korea-China relationship. China is currently South Korea's largest trade partner, accounting for more than a quarter of South Korean exports and 16% of Korean imports.
The FTA, which consists of 22 chapters, will lift trade and investment barriers in 17 economic sectors including investment, services, financing and government purchases. Furthermore, 90% of tariffs on goods traded between China and South Korea will be eliminated over the next 20 years. While the deal has been largely finalised, it needs to undergo a legal review before the FTA can be sent to the respective parliaments for ratification. The Chinese government therefore expects the FTA to be implemented by the middle of 2015.
Headline Industry Data
2015 tonnage throughput at the port of Busan forecast to increase by 5.50%.
2015 tonnage throughput at the port of Incheon forecast to grow by 2.00%.
Container throughput at the port of Busan is set to rise by 5.00% in 2015, while the port of Incheon is predicted to see a 10.0% increase.