Strong freight volumes a YTD highlight

17 May 2019

ICG: Strong freight volumes a YTD highlight

ICG’s trading update this morning points to ongoing strength in freight volumes, although Brexit uncertainties have weighed on car traffic YTD. It has also acquired a new LoLo vessel and extended its concession agreement at Belfast Port to 2026.

ICG reported a very positive freight performance YTD, with both RoRo and Container & Terminal (C&T) volumes performing strongly. RoRo volumes were +6.6% y/y in the period to 11 May while container volumes were +8.9% y/y and port lifts +7.5% y/y in the same period. This performance is attributable to buoyant early-year trade figures in the economy (Brexit-related stockpiling at play), increased capacity and the group’s strong market position.

 

Car volumes were -8.5% y/y to 11 May. The planned suspension of fast-craft sailings to Holyhead was the primary factor, but the group also noted a negative impact on bookings around the initial Brexit date of 29 March. Last week’s agreement to preserve the Ireland- UK Common Travel Area (CTA) post-Brexit, as well as the WB Yeats’ first summer sailing season, should help from here, although the risk is that the weakness in the UK market persists for longer.

 

ICG has also acquired a new LoLo vessel with a 1,421 TEU capacity (i.e. larger than the group’s existing LoLo ships) for €12.7m and agreed a 6-year extension to its current service concession agreement at Belfast Port. The new agreement runs until September 2026.

 

Irish Economy: Housing output +23% y/y in Q1

The latest New Dwellings Completions data from the CSO show that 4,275 residential units were completed in Q119, +23.2% y/y.

 

Completions in Q1 were comprised of 1,098 single units, 2,564 scheme houses and 613 apartments. Of those completions, 1,488 (35%) were in Dublin, ahead of the capital’s c. 28% share of the national population but hardly a surprise given the economics of new build in the city relative to other parts of the country.

 

On a 4qms basis national completions were 18,828 by end-Q119, the highest for the series (which started in 2011).

 

Were the Q119 annual growth rate of 23.2% to be sustained for the whole of this year, this would imply total 2019 completions of 22,204 which is 3% below our current forecast of 23,000 completions. We would be loath to move our estimate on the back of a single data point, but, in any event, the most important takeaway is that output remains well adrift of even the low point of the range of estimates (30,000 – 50,000) for annual new household formation, indicating that the path of least resistance for both house prices and rents will remain to the upside for some time to come.

 

Show sincerity or cancel trade talks

China is prepared to suspend trade talks with the United States if Washington continues its tough action against Beijing, according to Chinese state media. A commentary published by Taoran Notes, a social media account affiliated with Economic Daily, said China would not give an “effective response” to the US if Washington did not show sincerity in resolving the two countries’ trade disputes.

 

Tensions between the two sides escalated last week when Trump made good on his threat to more than double the tariff rate on US$200 billion worth of Chinese imports to 25 per cent after accusing Beijing of backtracking on pledges it had made in earlier rounds of talks. China hit back by imposing the same level of tariffs on US$60 billion of US products.

 

Brexit update

UK PM Theresa May met with Sir Graham Brady’s 1922 committee yesterday with a view to firming a date for her departure as PM. Not committing to a date, she left the meeting unscathed, for the moment at least but she has apparently agreed to meet them again after the next WBA vote on June 3rd. It now looks highly likely that Mrs. May will stand down if that June 3rd vote is unsuccessful.

 

We also saw ex-Foreign Secretary, Boris Johnson, officially throw his hat into any leadership battle when he said “of course I’m going to go for it” when he was asked by reporters if he will contest it. Mr. Johnson, Environment Secretary Michael Gove and current Foreign Secretary Jeremy Hunt are all likely to bid for the top job on Mrs. May’s departure. So this next WBA vote is now very important for various different reasons, not least because a loss could potentially see a hard-Brexit PM installed, increasing the chances of a general election which will ultimately take focus off Brexit negotiations. It’s not surprising then to see sterling on the back foot, the benchmark EUR/GBP is now at three month highs on the back of the current Brexit stasis and UK political uncertainty.

 

All eyes on EZ April CPI

Later this morning (at 10am) the final reading of Eurozone CPI numbers for April will be released with a notable increase estimated. The ECB will be looking for a sustained acceleration as the economy recovers. The expected increase in headline inflation may be transitory given the timing of holidays this year, suggesting underlying pressures remain subdued. The benchmark EUR/USD has been stuck in a tight 100 (1.1165/1.1265) point range for the past week and with a large speculative short EUR/USD position currently in the market, a surprise to the upside on this CPI print could well be the push it needs to break through the critical technical resistance level of 1.1265.

 

Economic Releases

10.00 EZ CPI
15.00 US Michigan Consumer Sentiment
16.15 US FOMC member Williams Speaks
18.40 US FOMC member Clarida Speaks