Boston, MA -- (SBWIRE) -- 06/14/2012 -- With Australia's fortunes very much tied up with China's, the forecast Chinese hard landing in 2012 will be to the detriment of demand, therefore striking a blow to the Australian freight sector. With China being a key export partner, slowing demand will mean that as China requires less iron ore and coal, for instance, exports will be hit as a result. Even though we believe that the extent of the Chinese hard landing holds the key as to whether or not Australia can avoid a recession in 2012, we have long held that a period of weakness in the Australian economy is highly likely, regardless of the outlook for Chinese demand.

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Domestically, the situation in Australia itself is somewhat sobering. Australia's GDP grew by a weak 1.8% in 2011, in line with our expectations. With the Q411 figures proving poor, we believe the economy will enter recession in 2012 and therefore we maintain our full-year growth forecast of 0.8%, versus the consensus expectation of 3.4%.

The outperformer this year by terms of sector will be maritime, led by the Port of Sydney in terms of tonnage throughput with year-on-year (y-o-y) growth of 4.80%. The ports of Melbourne and Brisbane will also post steady, if unimpressive, growth of 3.26% and 3.19%. Air, road and rail freight are all set for a poor year, with growth forecast to be 0.32%, 0.25% and 0.06% respectively.

Headline Industry Data

- 2012 air freight tonnage is expected to grow by 0.32%.
- 2012 rail freight tonnage is forecast to contract by 0.06%.
- 2012 Port of Melbourne tonnage throughput is forecast to increase by 3.26%.
- 2012 Port of Sydney tonnage throughput is forecast to grow by 4.80%.
- 2012 road freight is forecast to increase by 0.25%.
- 2012 total real trade growth is forecast at 0.7%.

Key Industry Trends

Oakajee Project: Questions On Viability May Deter China

Mitsubishi Corporation has begun its search for a strategic partner for the Oakajee port and rail project and the Jack Hills iron ore project in Western Australia, it was reported at the end of February 2012. The Japanese conglomerate scheduled Beijing as the first stop for its roadshow in late-February. BMI maintains that there is a still a lot of potential for both projects to face further delays and as such, Chinese investors may be hesitant to take part in the Oakajee and Jack Hills project given their potential lack of economic viability.

Rail Lines Reopen After Heavy Rains

The Goonyella, Blackwater and Newlands rail lines, which connect coal mines in Queensland, Australia, reopened on March 23 2012. The lines were shut down due to floods caused by heavy rains across the Bowen basin. The floods enforced the closure of the Abbot Point, Hay Point and Dalrymple Bay coal export terminals. but although the lines have reopened, they are still not operating at full capacity.

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