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Developments and trends in Israeli exports – Q2 2012

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Developments and trends in Israeli exports – Q2 2012 Developments and trends in Israeli exports – Q2 2012 Document Transcript

  • DEVELOPMENTS AND TRENDS IN ISRAELI EXPORTS Summary of the second half of 2012Written by the Economic DepartmentThe Israel Export and International Cooperation InstituteAugust 20121
  • Table of Contents:Executive Summary....................................................................................................... 3Export Adjustments ....................................................................................................... 6General – Exports of Goods and Services ..................................................................... 7Exports of Goods By Sectors ........................................................................................ 7Diamond Exports ........................................................................................................... 8Agricultural Exports ...................................................................................................... 8Industrial Exports .......................................................................................................... 9Exports of Services ...................................................................................................... 13Exports by Regions ...................................................................................................... 14Israels Main Export Markets: Developments and Changes ........................................ 21Top 10 Exporters of Goods ......................................................................................... 31Change in the Shekel’s Exchange Rates...................................................................... 322
  • Executive Summary2012 is shaping up to be a difficult year for exports. On the back of the dire crisis in theEU, the slowdown in the global economy and the contraction in the volume of globaltrade, during the last two quarters, exports of goods from Israel recorded the steepestdeclines since the height of the global crisis. While in the second half of 2011 thegrowth trend halted, during the first half of 2012 exports declined by 5% in dollarterms – for the first time since 2008.Exports of goods, excluding diamonds, ships and aircrafts: 2009-2012 (seasonally- adjusted)In line with the overall negative trend in exports in the first half of 2012, diamondexports fell by 23% in dollar terms compared with the same period of 2011. Industrialexports declined 4% in dollar terms and agricultural exports also decreased 4% indollar terms.During the first half of 2012, exports of high tech industries decreased 6% fromthe second half of 2011 and in fact have been steadily declining since the first halfof 2011. Likewise, exports of pharmaceuticals fell 12% (after declining 5% in thesecond half of 2011) and exports of electronic components rose 8% (following a 6%decrease in the second half of 2011). Exports of communications, scientific-medicaland control equipment (the core index of high tech industries1) declined 1% in the firsthalf of 2012, a similar decline as in the second half of 2011High tech exports, 2009-2012 (seasonally--adjusted)1 Total exports of high technology excluding pharmaceuticals, electronic components and aircrafts3
  • Other industrial sectors saw a negative trend, overall, with downturns recorded inexports of chemicals, minerals, metals, rubber and plastic, textile and food. On the otherhand, exports of machinery and equipment and electronic equipment increased.In contrast to the negative trend in the exports of goods, exports of servicescontinue to grow owing to a significant increase in exports of software, research anddevelopment (according to international statistical definitions, these items are classifiedunder services). Between January and June 2012, exports of services totaled $14 billion,rising 9% year-over-year. The growth in exports of services has offset the decreasein exports of goods (excluding diamonds), such that total exports of goods andservices (excluding diamonds) has remained at a similar level as in the first half of2011, pointing to stagnation in exports.During the first half of 2012, exports to the EU decreased 4% from the first half of2011, exports to Asia rose 14% year-over-year, primarily owing to the acceleratedgrowth in the exports of components and minerals, exports to Latin America grew by9% and exports to Africa increased 6% year-over year. While exports to the US fellby a sharp 20%, this drop is accounted for by a sharp decrease in the exports ofpharmaceuticals in the second half of 2011 (as a result of a change in Teva’s targetmarkets). Excluding this sector, the picture is reversed and exports to the US point to a3% increase.The first half of 2012 saw a downturn in exports to 5 out of 10 major exportdestinations, pointing to a decline in exports to developed markets, which was partiallyoffset by an increase in exports to developing markets.Ranking first among Israel’s major target markets in the first half of 2012 is the US. Asstated, exports to the US were primarily affected by the continued contraction in exportsof pharmaceuticals, which were diverted to alternative markets – excluding this effect,exports to the US actually recorded an upward trend, which was evidenced bymost sectors. Exports to Britain (the second-ranking exports target and the biggest inEurope) rose 17%, mostly owing to the growth in pharmaceutical exports, whichaccounts for more than 50% of exports to the country. Exports of other sectors duringthe reviewed period recorded a much more moderate increase of 4%.Exports to China remained stable. In the first half of 2012 China was ranked thirdamong export destinations, however, including Israeli exports to Hong Kong, theRepublic of China is placed second. The growth in exports to China continued to beled by three dominant sectors: electronic components, minerals (potash) andchemicals. Total exports by these sectors grew 58% during the first half of 2012topping 1 billion dollars, approximately 75% of total exports (compared to 64% of totalexports in the same period of 2011). Total exports to China, excluding the threemajor sectors, decreased 4% year-over-year, totaling $355 million only.The trend of contraction in exports to Germany and Turkey continued; exports toItaly also declined considerably, while exports to India and Brazil continued torecover driven by an increase in exports of minerals and chemicals to thesecountries.4
  • The 10 leading export markets – first half of 2012 vs. first half of 2011Exports of goods excluding diamonds, in $ billion Exports 2012 2011 Country Change (H1.2012, B$) Rating Rating US 4.9 1 1 (-) Britain 1.4 2 2 (-) China 1.4 3 4 +1 Netherlands 1.2 4 3 -1 Germany 0.8 5 5 (-) Turkey 0.8 6 6 (-) France 0.7 7 8 +1 Italy 0.6 8 7 -1 India 0.6 9 9 (-) Brazil 0.6 10 16 +5In the first half of 2012, the exports of the 10 biggest exporters accounted for 47%of total exports of goods excluding diamonds, similar to their weight in the wholeof 2011. Total exports for the 10 leading exporters of goods totaled $10.6 billion duringthe reported period, down 4% from the same period of 2011. In the years 2007-2011 theweight of the 10 biggest exporters in total exporters rose from 36% in 2007 to 47% in2011.The change in the shekel’s exchange rate: the real-effective2 currency basketdepreciated by 3.4% compared to the 2011 average. However, The currency basket’sexchange rate still points to a 13% appreciation versus the average level in 2006-2007. It should be noted that each 5% appreciation in the real-effective exchangerate contributes to a 1% real decrease in Israeli exports, with a 8-14 months’ lag ineffect. A similar effect in opposite direction results from a depreciation in the real-effective exchange rate. Furthermore, the decline in the Euro’s value against thedollar during the first half of 2012 explains part of the decrease in Israeli exportsto EU countries.The stagnation in exports in 2012 is the main contributory factor to the rise inunemployment: our calculations show that a 6% growth in exports is needed toprevent a rise in unemployment. A continued stagnation in exports until the end of2012 will push up unemployment to 8% at the start of 2013.2 In order to more accurately measure changes in foreign currency exchange rate development, theBank of Israel measures changes in the real-effective rate of the currency basket, which iscomposed of the shekel vis-a-vis the currencies of Israel’s main trading partners, net of inflationdifferences vis-a-vis each country).5
  • Export Adjustments: the link between exports based onforeign trade data and exports based on the balance of paymentand national accounting dataOn August 15, the Central Bureau of Statistics (“CBS”) published the firstestimate of the national accounts for the second quarter of 2012, which indicatesthat GDP rose by an annual rate of 3.2%, reflecting an annual 10% increase inexports of goods and services. In this context, we wish to emphasize several keypoints: A. The national accounts data published by the CBS are initial estimates only, which are likely to be revised at a later stage. In the first estimate for the previous quarter, the CBS reported a sharp 14% growth in exports of goods and services, which a month later was revised to 3% and by the third estimate revised to a 2% decrease in exports (a revision that reduced the growth rate for the reported period from 3% to 2.7%). Accordingly, in its current publication the CBS states that: “bear in mind that economic statistic in Israel have been characterized by high irregularity in the past few years. This makes it difficult to analyze developments based on a series of seasonally-adjusted quarterly data and it would be well advised to examine these developments over longer time periods”. B. Export figures based on foreign trade data (deriving from export records) do not include various adjustments in the calculation of goods and services exports in the balance-of-payment and in national accounting: Most of the adjustments in exports arise from the following: 1. International trade in goods sold overseas, where such goods do not enter or exit the country: pursuant to the new international guidelines for entry in the balance-of-payment, these transactions are recorded as exports of goods (in 2010 such transactions were recorded in the balance-of-services), where the purchase of goods overseas or the cost of production overseas by subcontractors are recorded as negative exports, and the sale of goods overseas to the end customer is recorded as a positive export. The summary of the two transactions will be recorded as net exports of goods. 2. Sales are recorded based on the work-in-progress in large plants: these plants carry out large-scale projects, while a partial execution of the projects is recognized as a sale that can be recorded in the company’s books. The entry in the balance-of-payments is based on the reports of companies that use this method, while the amounts reported by customs for such exports are deducted from foreign trade data. 3. Exports to the Palestinian Authority: these exports are recorded based on VAT invoices rather than customs documents, and are therefore not included in foreign trade data.6
  • General – Exports of Goods and Services3Israeli exports of goods and services in the first half of 2012 decreased 3% in dollarterms compared with the first half of 2011, totaling $41.6 billion. Exports of goodsfell 8% to $27.5 billion while exports of services grew 9% year-over-year totaling$14 billion.The decrease in exports of goods during the first half of 2012 primarily stemmedfrom a sharp drop of 23% in diamond exports which fell to $4.9 billion andaccounted for 18% of total exports of goods for the period. Industrial exports recorded a4% decline in dollar terms and it amounted to $21.8 billion (79% of total goodsexports). Agricultural exports also declined by 4% to $840 million (3% of total goodsexports).Exports of goods and services excluding diamonds and excluding sales of start-upcompanies in the first half of 2012 decreased 0.4% in dollar terms compared to thesame half of 2011.Exports of Goods by Sectors42012 is shaping up to be a difficult year for exports. On the back of the dire crisis inthe EU, the slowdown in the global economy and the contraction in the volume ofglobal trade, during the last two quarters, exports of goods from Israel recordedthe steepest declines since the height of the global crisis.During the first quarter of 2012 exports of goods excluding diamonds declined 4.2% indollar terms compared to the fourth quarter of 2011, the first significant decrease sincethe second quarter of 2010 and the steepest since the first quarter of 2009 – export datafor the second quarter point to a continued contraction of Israeli exports. Duringthis quarter exports fell by 2% in dollar terms, a decline that was reported by mostsectors.3 As stated, the export figures presented below do not include various adjustments in the calculationof goods and services’ exports in the balance-of-payment. These adjustments include ongoingprojects where no shipments have left the ports of Israel as well as sales made directly bysubcontractors that carry out projects for Israeli companies.4 All export figures presented below relate to the exports of goods excluding diamonds, ships andaircrafts – unless otherwise stated. Previous period relates to the previous quarter and based onseasonally-adjusted data. Corresponding period relates to the same quarter of 2011 and based onoriginal data.7
  • Exports of goods, excluding diamonds, ships and aircrafts: 2009-2012Change in export volumes – quarter vs. previous quarter, seasonally-adjusted dataSource: Central Bureau of Statistics. Analysis by the Export InstituteThe decrease in exports is also apparent when comparing data with the same period of2011: in the first quarter of 2012 exports declined 1.8% (year-over-year), in the secondquarter the pace of decline accelerated to 6%. Overall, during the first half of 2012exports decreased 5% compared to the same half of 2012 and by 4% compared to thesame period of 2011. Total exports in the second quarter of 2012 totaled $11.4 billion –3% below the quarterly exports average in the whole of 2011.Diamond ExportsFollowing a 23% growth in diamond exports in 2011 (which, among others, wasaffected by the price hike in the industry), the trend reversed and diamond exportsfell 23% from the first half of 2011, totaling $4.9 billion. During the first half of2012 exports of refined diamonds amounted to $3.4 billion (70% of total diamondexports), dropping 17% compared to the same half of 2011, while exports of crudediamonds totaled $1.5 billion (30% of total diamond exports), down 34% from the sameperiod of 2011.Agricultural ExportsDuring 2011 agricultural exports rose 4% to a total of $1.4 billion. In the second quarterof 2012, agricultural exports fell 12% from the same period of 2011 and 8% fromthe first half of 2011. Agricultural exports in the first half of 2012 decreased 4% fromthe first half of 2011, totaling $840 million which accounts for 4% of total goodsexports during the period. Bear in mind that since most of the agricultural exportsare targeted at EU countries, the dollar income from these exports was highlyaffected by the Euro’s depreciation vis-a-vis the US dollar during the period.8
  • Industrial ExportsIn the first half of 2012 industrial exports decreased 2% quarter-over-quarter and4% year-over-year. High tech exports, which declined 10% during the first quarter of2012 from the fourth quarter of 2011, rose slightly during the second quarter, but thisgrowth primarily stems from an increase in pharmaceuticals and electronic components.In other industrial sectors a clear negative trend was recorded in the secondquarter of 2012, with declines in the export of chemicals, machinery and equipment,metals, rubber, plastics and textile, to name a few.9
  • High Tech ExportsDespite a slight increase in high tech exports, a worrisome downturn trend inexport development is notable. An analysis of high tech exports quarter over quarterpoints to a contraction in exports in 3 out of the last 5 months. An analysis of the datayear over year is indicative of a significant slowdown in the second half of 2012, whichdeveloped into an apparent decline during the second quarter of 2012. Overall, in thesecond quarter of 2012, high tech exports fell by 7.5% from the second quarter of2011, while in the first quarter of 2011 high tech exports fell 7% from the firstquarter of 2011.The negative trend in high tech exportsChange in export volumes – quarter vs. previous quarter, original dataIn the second quarter, pharmaceutical exports rose 7% quarter-over-quarter, anincrease that partially offset the decrease in high tech exports – it should be noted,though, that this increase follows a sharp 20% drop during the first quarter of 2012.Overall, Israel’s pharmaceutical exports fell 20% during the first half of 2012.Excluding pharmaceutical exports (which are subject to high volatility from oneperiod to the next) from total high tech exports, the result is a 3% decrease indollar terms in the second quarter of 2012, following a 1.5% decline in the firstquarter of the year. An analysis of the development high tech exports, with theexclusion of pharmaceuticals, also points to a consistent decline in export volumes(a decline in 3 out of the last 5 months).10
  • Exports of high tech industriesChange in export volumes – seasonally-adjusted data, $ million Pharmaceuticals Electronic components and computers Communications, control, medical & scientific equipment Aircrafts 2500 2000 1500 1000 500 0Exports of electronic components and computers rose 7% in dollar terms quarter-over-quarter, while exports of communications and control equipment as well asmedical and scientific equipment fell 8.5%.Exports of aircrafts are subject to great volatility due to the nature of the transactionsand the date of delivery in the industry. In the first half of 2012, aircraft exportsdecreased 6% compared to the same period of 2011. During July 2011 (which was notincluded in the above calculation) an exceptional transaction was recorded – with $640million worth of exported aircrafts, 4.5 times the average exports in April-June and 50%higher than the total exports of this industry for the three months.Total high tech exports in the second quarter of 2012 amounted to $5.2 billion:pharmaceutical exports totaled $1.7 billion (33% of high tech exports), exports ofelectronic components and computers totaled $1.2 billion (23% of high tech exports),exports of communication and control equipment, medical and scientific equipmenttotaled $1.8 billion (36% of high tech exports) and aircraft exports in the second quartertotaled $425 million (8% of high tech exports).11
  • Other Industrial Sectors:A negative trend was also observed for the majority of other industrial sectors inthe second quarter of 2012. Exports of chemicals (excluding pharmaceuticals) fell by10% in dollar terms (totaling $2.1 billion), exports of machinery and equipmentdeclined 7.5% (to $772 million), exports of metals declined 6.5% (to $607 million),exports of rubber and plastics decreased 6% (totaling $484 million), exports oftextiles declined 1% (totaling $209 million), exports of jewelry fell 12% (to $97million), and exports of wood products, paper, publishing and printing fell 16%year-over-year to $89 million.On the other hand, a small number of sectors recorded an increase: export of mineralswas one of the few industries to grow year-over-year, rising 51% to $623 million – afterfalling 34% in the first quarter of 2012. However, it should be noted that this sector isprimarily affected by the potash exports of Israel Chemicals, which fluctuate from oneperiod to the next, depending on the dates of renewal of potash contracts. Anotherindustry that recorded an increase from the previous quarter was export of electricalequipment, which rose 4% to $328 million. Exports of food and beverages remainedunchanged at $250 million.Exports of industrial sectorsIn grey: change in export volumes – QoQ, seasonally-adjusted data in $ millionIn red: export volumes – Q2/2012, original data in $ millionSource: Central Bureau of Statistics. Analysis by the Export Institute12
  • Exports of ServicesIn contrast to the negative trend in goods exports year-to-date, services exportscontinue to grow handsomely, mainly owing to a significant increase in exports ofsoftware and R&D in the first half of 20125. The growth in services exports hasoffset the decrease in goods exports (excluding diamonds), such that total exportsof goods and services (excluding diamonds) is effectively at the same level it waslast year, pointing to stagnation in exports.In the months January-June 2012, services exports amounted to $14 billion, up 9%from the same period of 2011. Exports of business services (including start-upcompanies), which accounts for 66% of total services exports, grew 12% year-over-yearto $9.3 billion. Exports of tourism services grew 9% year-over-year to $2.6 billion(19% of total services exports). Exports of transportation services decreased 5% to$2.1 billion (15% of total services exports).Among the business services sectors:Exports of computer services, which accounts for 39% of exports of business servicesand 26% of total exports of services, rose 16% during January-June 2012 year-over-year, to a total of $3.6 billion.Exports of research and development services, which accounts for 25% of exports ofbusiness services and 16% of total exports of services, rose 36% during the said periodto $2.3 billion. Exports of services by startup companies (which partially derivesfrom total exits during the period) leaped 120% during January-June to a total of $630million.Additional sectors exporting business services:Exports of wholesale commerce rose 4% to $370 million (4% of total services exports)while exports of banking and financial services fell 30% to $210 million (2% of totalservices exports).Exports of services to the Palestinian Authority in January-June 2012 totaled $102million, up 1% in dollar terms from the same period of 2011. Total exports to theAuthority accounts for 1% only of Israel’s total services exports.5 In accordance with international statistical definitions, exports in these sectors are classified underservices.13
  • Exports by RegionsAnalysis of data of exports of goods excluding diamonds, by regionsThe negative trend in exports during the second quarter of 2012, stemmed, amongothers, from a decrease in Israel’s exports of goods to EU countries, which was alsoaffected by the sharp decline in the Euro against the dollar6. Exports to theEuropean Union, which accounts for one third of Israeli exports, decreased 2% from theprevious quarter, after dropping 14% in the first quarter of 2011.On the other hand, exports of goods to the US excluding diamonds rose 2% from thefirst quarter of 2012 (after rising 6% during the quarter), following the dramatic declinein the exports of chemical industries to the US (mainly pharmaceuticals) during thesecond half of 2012.Exports to Asia rose 11% during the second quarter of 2012, pointing to a consistentgrowth rate. Exports to the Rest of the World fell 16% quarter-over-quarter, aftergrowing 5% in the first quarter of 2012.Development of exports by regionsExport volume – seasonality-adjusted data, $ millionSource: Central Bureau of Statistics. Analysis by the Export InstituteAn analysis comparing export figures by trade regions compared to the samequarter of 2011 points to a trend of significant decline in exports to Europealongside stability and growth in exports to Asia. For example, in the second quarterof 2012 exports to EU countries fell 13% year-over-year. Exports to Asia, in contrast,rose by an impressive 20% year-over-year during the second quarter of 2012. Exports tothe US fell by a sharp 18% year-over-year; however, this is entirely explained by adramatic decrease in exports of chemical industries (mainly pharmaceuticals) during the6 The Euro depreciated 2.1% against the dollar in Q2/2012, and 2.7% in Q1/2012.14
  • second half of 2011. Net of this sector’s impact, the picture is reversed pointing to a6% increase in exports to the US. Exports to the Rest of the World fell 1%.These trends are reinforced by comparing data for the second quarter of 2012 to theaverage data for 2011. This comparison suggests that exports to EU countries inQ2/2012 is 5.5% below the 2011 average, exports to the Rest of the World is 6% belowaverage while exports to Asian countries in Q2/2012 is 13% above the 2011 average.Exports in the second quarter of 2012 vs. the 2011 averageBy trading regions – original dataSource: Central Bureau of Statistics. Analysis by the Export InstituteThe European UnionThe downturn trend in exports to the EU has aggravated in the first two quartersof 2012, after growing sharply by 21% during 2011 and being one of prominentdrivers of Israeli exports during that year. In the first quarter of 2012 exports to theEU fell 14% quarter-over-quarter, with a further quarter-over-quarter 2% decreaserecorded in the second quarter of 2012. Some of the decline in the value of exports tothe EU stems from the rapid depreciation in the Euro against the dollar during thoseperiods. In the first quarter of 2012 the Euro declined 2.7% vis-a-vis the dollar while inthe second quarter it depreciated by a further 2.1%.A similar picture is drawn when comparing the data to the same period of 2011; in thesecond quarter of 2012 exports to the EU dropped 13% year-over-year, which isprimarily accounted for by the Euro’s 11% depreciation against the dollar compared tothe second quarter of 2011.During the second quarter of 2012 the majority of industrial sectors to the EU sawa drop in exports. Exports of chemical industries (including pharmaceuticals) fell13% (totaling $1.6 billion), exports of machinery and equipment decreased 11% (to a15
  • total of $732 million), exports of rubber and plastic fell 17% (totaling $317 million),exports of medical-optical instruments declined 7% (to a total of $211 million),exports of metals declined 11% (totaling $196 million), exports of plant productsdecreased 10% (to a total of $193 million), exports of food and beverages decreased1.5% only (totaling $82 million) and exports of textile products fell 24% from thesame quarter of 2011 (totaling $85 million).In the second quarter of 2012 there was an overall decrease in Israeli exports to allmajor export destinations in the EU (8 markets, which together account for 70%of total exports to the EU). Exports to Britain, Israel’s leading export market inEurope, decreased 3% year-over-year (totaling $838 million), and was primarilyaffected by the British pound’s depreciation against the dollar at a similar rate. Exportsto Germany fell 16% (to $416 million), exports to France dropped 16% (to $289million), exports to France decreased 4% (totaling $273 million), exports to Italydropped by a staggering 30% (to $265 million), exports to Cyprus decreased 8% year-over-year (to $211 million) and exports to Belgium fell 13% (totaling $210 million).The only market to which exports did not decrease was The Netherlands – whereexports actually increased by 3% in the second quarter of 2012 to a total of $576million. At the same time, exports to the Netherlands slowed rather considerablycompared to the 12% growth in exports in the first quarter of 2012 (year-over-year),which totaled $634 million. (Bear in mind that many Israeli companies has set up parentcompanies and subsidiaries, so that the Netherlands has become a transition market forIsraeli exports to other countries).Overall, exports to the EU, excluding diamonds, in the first half of 2012 totaled $7.3billion, representing 32% of total Israeli exports during this period.Exports to the EU, 2009-2012Export of goods excluding diamonds / original data / in $ millionSource: Central Bureau of Statistics; analysis: the Export InstituteA detailed analysis of the development of exports to Israel’s major export markets inEurope is presented below16
  • United StatesFollowing a continued decrease in exports to the US and a consistent decline in itsweight in total Israeli exports, in the first quarter of 2012 exports to the US pickedup considerably, and in contrast to the general negative trend rose 6% quarter-over-quarter. In the second quarter of 2012 exports to the country rose slightly by2% from the first quarter. Exports figures for the first and second quarter of 2012 arestill significantly below those recorded in the same period of 2011, due to the dramaticdrop in the exports of chemical industries to the US (almost entirely pharmaceuticals) –a decline that had a material affect on total exports to the country. During the firstquarter of 2012 exports to the US fell by 22%, but excluding the sharp 44% drop inexports of chemicals (mainly pharmaceuticals), this year-over-year decrease isoffset entirely.The trend of recovery in exports to the US is also apparent from the data for the secondquarter of 2012: excluding the effect of the sharp drop in chemical exports (40%), theresult is a 6% increase in exports to the US year-over-year.Overall, exports of goods to the US, excluding diamonds, in the first half of 2012amounted to $4.9 billion – 22% of total Israeli exports.Exports to the US, 2009-2012Export of goods excluding diamonds / original data / in $ million 3,400 3,200 3,000 2,800 2,600 2,400 2,200 2,000 10 10 10 10 11 11 11 11 12 12 20 20 20 20 20 20 20 20 20 20 1. 2. 3. 4. 1. 2. 3. 4. 1. 2. Q Q Q Q Q Q Q Q Q Q Exports to the USSource: Central Bureau of Statistics; analysis: the Export Institute - A detailed analysis of the development of exports to the US is presented below -17
  • Effect of chemical exports on total exports to the EU and the USRate of growth year-over-yearSource: Central Bureau of Statistics; analysis: the Export InstituteThe sharp drop in pharmaceutical exports points to a considerable diversion ofthese exports from the US to traditional and developing markets for the purpose ofreducing dependence on one geographic region.AsiaIn contrast to the general trend, exports to Asian countries rose 11% quarter-over-quarter in the second quarter of 2012. Exports to Asian countries maintained astable growth despite the sharp volatility and downturn trend in Israeli exportsduring 2012, with an increase recorded in 6 out of the last 7 quarters. Compared tothe same quarter of 2011, exports to Asia rose 20%.Total exports to Asia in the second quarter of 2012 came at $2.5 billion, representing22% of total Israeli exports during the period. The growth in exports to Asia year-over-year was due to the continued growth in exports to China and the accelerated growth inexports to Vietnam (owing to the sharp increase in exports of electronic components7).Likewise, the continued recovery in exports to South Korea and India contributed to thepositive trend in exports to Asia. On the other hand, exports to Japan and Taiwandropped considerably, thus slightly offsetting the growth in exports to the continent.7 Global Intel has assembly and testing facilities in China and Vietnam and a large portion of theproduction of components in Israel is transferred to these countries.18
  • Exports to Asia, 2009-2012Export of goods excluding diamonds / original data / in $ million 2,600 2,500 2,400 2,300 2,200 2,100 2,000 1,900 1,800 10 10 10 10 11 11 11 11 12 12 20 20 20 20 20 20 20 20 20 20 1. 2. 3. 4. 1. 2. 3. 4. 1. 2. Q Q Q Q Q Q Q Q Q Q Exports to AsiaSource: Central Bureau of Statistics; analysis: the Export InstituteIt should be noted that most of the growth in exports to Asia is affected by the growth inthe export of electronic components, chemicals and minerals, sectors controlled by twoof the biggest exporters in Israel (Intel and Israel Chemicals), and by the businessdecisions of these manufacturers with regard to the distribution of exports among targetmarkets and supply dates. Thus, in the first half of 2012 exports of goods to Asia8totaled $8.5 billion, up 1.5% year-over-year, while net of these industries, exports toAsia actually decreased 3.5% in the first half compared to the same period of 2011.Rest of the WorldExports to other trading partners (Latin America, Ukraine, Canada and the rest ofEurope) in the second quarter of 2012 fell by a sharp 16% from the previous quarter,and by 1% from the same quarter of 2011. Total exports to these regions in the secondquarter of 2012 amounted to $2.7 billion, accounting for 24% of Israeli exports duringthe period.Most of the decrease in exports to the rest of the world stemmed from the rapidcontraction in exports to Turkey – Israel’s biggest export destination within the “Rest ofthe World” group and one of Israel’s key export markets in general. Exports to Turkey,which grew 43% in 2011 (totaling $1.85 billion), fell 18% year-over-year in the secondquarter of 2012, after dropping 23% in the first quarter. Overall, in the first six monthsof 2012 exports to Turkey fell more than 20% compared to the first half of 2011, from8 Including diamonds19
  • $955 million to $755 million. In addition, exports to Costa Rica plummeted by 80%,which had a material effect on exports to the “ROW” group. It should be noted thatexports to Costa Rica almost entirely consists of electronic components andabsolutely affected by Intel’s business decisions regarding the allocation of Israeliproduction to globally dispersed plants owned by global Intel, which assembledthese components.In contrast, the rise in exports to Brazil and Russia had a favorable effect. Exports toBrazil grew 31% year-over-year, totaling $325 million and exports to Russia rose 23%to $270 million. Another export market that has been growing at increasing rates isNigeria - in the second quarter of 2012 exports to this country leaped 149% to atotal of $122 million.The growth in exports to Egypt continued in the second quarter of 2012; duringthe quarter, exports to the country rose 34% to a total of $36 million. In the firsthalf of 2012, exports of goods totaled $149 million, growing 198% year-over-year.Most of the increase is accounted for by the growth in the chemicals industry, whichrepresented 66% of exports to Egypt during the period. Exports of chemicals soaredmore than 800% to $98 million.Second quarter 2012: change in the relative weight of export marketsWeight of target market in Israeli exports, Q2/2012 versus Q2/2011Source: Central Bureau of Statistics; analysis: the Export Institute20
  • Israels Main Export Markets: Developments andChangesRating of export markets and details by sectors, exports of goodsexcluding diamondsIn the second quarter of 2012 there was a decrease in exports to 6 out of 10 majorexport markets, as compared to a decrease to 2 out of 10 major export destinationsin the quarter of 2011. A summary of export data for the first half of 2012 draws asimilar picture of a downturn in exports to developed markets, which was partlyoffset by the rise in exports to developing markets.For example, during the first half of 2012 exports to France declined 3% year-over-year, exports to Italy decreased 16% and exports to Germany fell 17% incomparison to the first half of 2011. (It should be noted that during the secondquarter, the Euro fell sharply against the dollar, which affected exports in dollarvalue terms. However, net of this impact exports to EU countries have still fallenduring the second quarter9).In contrast to the drop in exports to developed countries, exports to developingmarkets maintained a positive trend. Exports to China in the first half of 2012 rose36% year-over-year, exports to Russia rose 18%, exports to India increased 3%and exports to Brazil soared 42% year-over-year.Israel’s 10 major export destinations: first half of 2012Based on exports of goods excluding diamonds, in $ million, change in % year-over-year9 During Q2/2012 the Euro fell by an average quarterly rate of 11% against the dollar, further toan average 4% decline in Q1/2012. The GBP weakened by an average 3% further to a 2% declinein Q1/2012.21
  • The change in the rating of 10 major export markets - first half of 2012Based on exports of goods excluding diamonds, in $ million Exports Country Rating 2012 Rating 2011 Change (H1.2012.B$) US 4.9 1 1 (-) Britain 1.4 2 2 (-) China 1.4 3 4 +1 Holland 1.2 4 3 -1 Germany 0.8 5 5 (-) Turkey 0.8 6 6 (-) France 0.7 7 8 +1 Italy 0.6 8 7 -1 India 0.6 9 9 (-) Brazil 0.6 10 16 +5Countries’ weight in exports: first half of 2012Based on exports of goods excluding diamonds, in $ millionSource: Central Bureau of Statistics. Analysis by the Export Institute22
  • The United StatesRated first among Israel’s leading export destinations is the US. Exports of goods(excluding diamonds) to the US in the first half of 2012 totaled $4.9 billion, droppingsteep 20% from the first half of 2011. As stated in the previous section, this dropstemmed almost entirely from a sharp decrease in exports of pharmaceuticals, withoutwhich exports to the US would have risen 3% year-over-year. Exports ofpharmaceuticals, Israel’s industry with the biggest export volumes to the US, felldramatically during 2012. In the first quarter of 2012 exports of pharmaceuticals to theUS dropped 52% year-over-year. The second quarter draws a similar picture with a 45%decline year-over-year in this industry’s exports. These data point to a permanentchange due to a strategic decision by the biggest company in the industry todiversify its target markets. Overall, pharmaceutical exports to the US in the first halfof 2012 totaled $1.4 billion, a steep 49% drop from the first half of 2011.Other exporting industries to the US generally recorded a positive trend. Amongthe major export industries, in the first half of 2012 there was an increase in exports ofchemicals and oil distillates (up 19% to $475 million), exports of medical andsurgical equipment (up 3% to $278 million), exports of rubber and plastic products(up 19% to $221 million), exports of engines and electric equipment (up 22% to $174million), exports of office machinery and computers (up 21% to $160 million),exports of industrial equipment for control and supervision optical equipment andphotographic instruments (up 32% to $148 million) and exports of food andbeverages (up 14% to $114 million).On the other hand, there was a decrease in exports of telecommunication equipment(down 10% to $285 million), exports of metals (down 14% to $267million), andexports of instruments for testing, measuring and navigating (down 6% to $215million).Exports of electronic components continued to contract due to the diversion of exportsby electronic component companies from developed to developing markets, but itsimpact on total exports to the US declined considerably, relative to the last few years.Exports of electronic components to the US in the first six months of 2012 amounted to$152 million only, dropping 26% from the same period of 2011. Exports of electroniccomponents, as stated above, is significantly affected by the business activity of Intel,which holds assembly and testing facilities for its products in China, Vietnam, Malaysiaand Costa Rica. Over the past year there was a dramatic decline in exports ofcomponents to the US while the export of such components to several Asia countriesincreased considerably. These changes result from inner-company businessconsiderations and do not necessarily point to general trends in Israeli exports.BritainAccording to export data for the first half of 2012, Britain is Israel’s second-biggestexport destination (similar to its ranking in the first half of 2011), and the biggestdestination among European countries. Total exports to Britain during the period were$1.5 billion, up 17% compared to the same period of 2011.23
  • Like the situation in the US, exports to Britain are highly affected by the dominance ofthe pharmaceutical market, primarily due to Teva’s operations in the UK, which hasbecome a major target market for the company after diverting some of its US exports.This sharp growth in pharmaceutical exports is the key factor that secured Britain’sposition in 2012 as Israel’s second most important export market and biggest targetmarket in Europe. Between January and June 2012 exports of pharmaceuticals to theUK rose 48% to $800 million, 53% of total exports to the country. For the sake ofcomparison, exports of all other sectors during the said period totaled $700 milion,rising a moderate 4% from January-June 2011.The growth in pharmaceutical exports to the UK accelerated during the second quarterof 2011 and therefore, while the first quarter of 2012 points to a quantum leap of 735%year-over-year, the second quarter witnessed stability in export levels from last year. Inline with thee developments, in the second quarter of 2012 exports to the UKdecreased 2% after growing by a sharp 87% in the first quarter of the year.During the second quarter of 2012 most of the key industries exporting to the BritishIsle recorded a decrease in exports. Exports of chemicals (excluding pharmaceuticals)which grew 64% in the first quarter of 2012, fell 6% in the second quarter of 2012.Summing up the two quarters, these exports rose 19% to $156 million. The growth inagricultural exports slowed from 35% in the first quarter to 17% in the second quarter(overall in the first half of 2012 it rose 7% to $82 million), exports of rubber andplastic products, which rose 14% in the first quarter, remained unchanged in thesecond quarter (in the first half of 2012 it rose 7% to $79 million). Exports of aircraftsincreased 20% in the first quarter but declined 3% in the second quarter (totaling $45million in the first half of 2012, up 8%). Exports of telecommunications equipmentwhich rose 28% in the first quarter, decreased 5% in the second quarter (totaling $41million in the first half of 2012, up 9%). Exports of textile and leather productsdecreased 16% in the first quarter and dropped 30% in the second quarter (totaling $32million in the first half of 2012, down 23%), exports of machinery and equipment,which rose 43% in the first quarter, remained unchanged in the second quarter (totaling$31 million in the first half of 2012, up 21%) and exports of medical and surgicalequipment which grew 46% in the first quarter, rose a further 28% in the secondquarter (totaling $25 million in the first half of 2012, up 37%).Other sectors that recorded a downturn in the second quarter of 2012 were: industrialequipment for control and supervision optical equipment and photographicinstruments (down 33% in the first quarter and down 37% in the second quarter –overall down 35% in the first half of 2012 to $21 million), office machinery andcomputers (from a 4% increase in the first quarter to a 13% decrease in the secondquarter – overall down 5% in the first half of 2012 to $21 million), and food, beveragesand tobacco (down 2% in the first quarter and down 18% in the second quarter –overall down 10% in the first half of 2012 to $20 million). Exports of metals in thefirst half of 2012 totaled $49 million, unchanged year-over-year.24
  • ChinaAfter a slight deceleration in the growth rate in the first quarter of 2012, during whichexports to China grew 17% “only”, exports to the country accelerated in the secondquarter with a 52% growth rate. As we projected in our review for the first quarter of2012, during the second quarter there was a marked improvement in exports to Chinaowing to a sharp growth in exports of minerals – one of the main export industries toChina. In the first half of 2012, exports of goods to China (excluding diamonds) totaled$1.4 billion, a 36% increase from the same period of 2012. China is third amongIsrael’s main export destinations, but if we include exports to Hong Kong, Chinarises one level to the second place with total exports valued at $1.65 billion (aheadof Britain, with exports of $1.5 billion during the period).The main industrial exports to China are electronic components, chemicals and mineralswhich, in 2011, accounted for 68% of total Israeli exports to this country. Thedominance of these sectors in exports to China grew during the first half of 2012,reaching 75% of total exports to the country. These sectors are almost absolutelyaffected by the business activity of two large corporations: Intel (electroniccomponents) and Israel Chemicals (chemicals and minerals), and the acceleratedgrowth in exports to China in the last year primarily stems from the activity ofthese companies.In 2011, Israeli exports to China totaled $2.3 billion (a 32% growth following a sharp97% growth in 2010). During this year, exports of electronic components, chemicalsand minerals to China aggregated in excess of $1.5 billion, while exports of all otherindustries totaled less than half ($743 million). Moreover, while exports of the threemajor industries leaped 43% in 2011 and accounted for the accelerated growth inexports to China, other industries recorded a more moderate increase of 14% only.The contrasting trends in exports to China in 2011, strengthened in 2012. Totalexports of the 3 dominant sectors in the first half of 2012 grew 58% to more than$1 billion, representing 75% of total exports, as compared to 64% of total exportsin the same period of 2012. Net of the three dominant industries in the first half of2012, the picture is reversed and actually points to a decrease in exports year-over-year. Total exports excluding these industries declined by 4% year-over-year,totaling $355 million only.The main industrial exports to China in the last few years is electronic components,which, to a large extent, is dominated by Intel, and during the first half of 2012 grew100% year-over-year, totaling $646 million, 46% of total exports to China.Exports of minerals, which primarily includes potash, is the second biggest exportindustry and as of June 30, 2012, accounts for 18% of total exports to China. During thesecond quarter there was a marked improvement in mineral exports, an industry that isentirely affected by Israel Chemicals’ activity in China. As stated in our previousreview, in March 2012 ICL announced that it signed agreements with several Chinesecustomers for the supply of Potash aggregating 550,000 tons (estimated at $250million), some of which was supplied during the second quarter of 2012. Accordingly,there was a sharp growth in minerals exports in the quarter, leading to a 20% increase inthese exports overall during the six-month period. Total exports of minerals to China in25
  • the first half of 2012 was $247 million, the bulk of which (98.5%) was recorded in thesecond quarter.Based on ICL’s reports, in the third quarter the company is expected to supply toremaining goods pursuant to the previous agreement. Consequently, potash exports toChina are expected to remain on the growth path and have a positive affect on exportsof goods to China in the third quarter of 2012. It is yet unknown when the company isexpected to renew supply contracts with Chinese exporters, while current estimatessuggest the end of the third quarter.The chemicals industry rank third in export volumes to China, accounting for 11% oftotal exports to the country halfway through 2012. Chemicals exports during the periodgrew 13% to $151 million.As stated above, exports of other industries (excluding the 3 dominant sectors)decreased 4% in dollar terms year-over-year, totaling $355 million only. Amongother sectors, declines were recorded in exports of metals (down 12% to $62 million),exports of machinery and equipment (down 3% to $57million) and exports ofinstruments for measuring and navigating (down 59% to $27 million) On the otherhand, an increase was recorded in the exports of medical and surgical equipment (up35% to $60 million), in exports of telecommunication equipment (up 45% to $57million), and exports of office machinery and computers (up 33% to $24 million).The NetherlandsAccording to data for the first six months of 2012, the Netherlands is ranked fourthamong export markets. Total exports to the Netherlands in January-June 2012 came to$1.2 billion, up 8% from the same period in 2011.The increase in exports to the Netherlands was primarily driven by a sharp growth inexports of pharmaceuticals, which doubled year-over-year, from $146 million in thefirst half of 2011 to $304 million in the current half (25% of total exports to theNetherlands). Excluding pharmaceutical exports, the growth in exports to theNetherlands was 3% year-over-year, totaling $900 million.Other key sectors exporting to the Netherlands: chemicals and oil distillates fell 21%to $263 million (22% of total exports), agricultural exports rose 45% to $170 million(14% of total exports) and exports of machinery and equipment, which rose 18% to$160 million (13% of total exports).Additional changes were recorded in the first half of 2012: exports oftelecommunications equipment (down 3% to $42 million), exports of minerals,mining and quarrying products (up 4% to $39 million), exports of food andbeverages (down 11% to $39 million), exports of office machinery and computers(up 39% to $3 million) and exports of rubber and plastic products (down 8% to thesame level).26
  • It should be noted that many Israeli companies have parent companies, subsidiaries oraffiliates in the Netherlands, and the country constitutes a gateway for Israeli companiesto other European countries as well as to certain countries outside Europe.GermanyThe worrisome trend of contraction in exports to Germany continued during the secondquarter of 2012. After dropping 18% during the first quarter, exports fell by a further16% in the second quarter. Overall exports of goods to Germany in the first half of 2012(excluding diamond) fell 17%, totaling $827 million. Germany is the 5th biggest targetmarket for Israeli exports in the world and third in Europe10.Germany is one of the most stable target markets for Israeli exports, postingsteady growth rates over the last few years. Exports to Germany are highlydiverse, without one dominant sector or company that distinctively affects exportsto the country – for this reason, the continued decline in exports to Germany,which was recorded by nearly all the major sectors, is a cause for concern.4 out of the 5 major industrial exports to Germany (accounting for 50% of totalexports to this market) recorded declines from the first half of 2011 (the fifthsector remains stagnant): exports of chemicals and oil distillates fell 10% (to $121million), exports of rubber and plastic dropped 9% (totaling $87 million), exports ofmachinery and equipment fell 30% (to $76 million), exports of metals declined 11%(to $72 million) and exports of electronic components remained unchanged year-over-year (totaling $57million).Our analysis further shows that similar to the trend in the first quarter of 2012,only 2 out of 12 major export industries (accounting for 84% of total exports)recorded an improvement from the same period of 2011. Exports of medical andsurgical instruments rose 8% year-over-year to $53 million, while exports ofpharmaceuticals grew 11% to $31 million.TurkeyDespite a sharp drop in exports in the first two quarter of 2012, Turkey maintained itsposition as the 6th ranking market for Israeli exports. Similar to the negative trend inexports to Germany, the contraction in exports to Turkey persisted: in the first quarter of2012 exports to the country fell by 23% while in the second quarter they dropped 18%year-over-year. Overall, exports of goods to Turkey in the first half of 2012decreased 21% to $755 million.10 Given the fact that Holland is a passageway for goods to other destinations around the world and thatgoods exported from Israel to Holland are not intended solely for this market, some consider Germany asthe second most important exports market in Europe.27
  • Unlike Germany, exports to Turkey are dominated by chemicals and oil distillates,which accounted for 70% of total exports to the country in the past year. In fact, theentire growth in exports to Turkey in 2011 (38% to $1.8 billion) resulted from a sharp65% increase in exports of chemicals and oil distillates. Excluding this industry,exports to Turkey did not grow in 2011. In the first half of 2012, this industry saw asharp 29% drop in exports to Turkey, and its weight in total goods exports to Turkeydeclined to 61%.Exports of metals, which in the first half of 2012, accounted for 11% of total exports tothe country, also recorded an exceptional increase in the first half of 2011. Theseexports primarily consist of metal scraps and metals for recycling. During January-June2012 metal exports fell 18% year-over-year to $83 million.A positive point arising from a sectoral analysis of exports to Turkey is the fact thatexcluding the two aforementioned dominant sectors, the entire decrease is offset(resulting in a small 0.5% increase in dollar terms). In fact, exports of otherindustries during the second quarter of 2012 actually improved considerably from thefirst quarter: during the second quarter of 2012 exports of other sectors was 18% year-over-year, after declining 15% in the first quarter.A positive trend was recorded by other sectors: exports of machinery and equipmentrose 28% (to $36 million), exports of engines and electric equipment grew 49% (to$30 million), exports of pharmaceuticals rose 3% (to $16 million), exports of textilesrose 12% (to $15 million), exports of minerals leaped 99% (to $15 million) andagricultural exports grew 16% year-over-year to $14 million. On the other hand,exports of paper and wood products fell 17% to $23 million.It should be noted, that like the Netherlands, Turkey serves as a gateway to some of thegoods exported to it.FranceIn the first half of 2012 France was Israel’s 7th biggest target market (rising from the 8thplace in the same period of 2011). Exports of goods excluding diamonds to Franceduring the period totaled $673 million, down 3% in dollar terms from the same periodof 2011. Excluding the Euro’s depreciation against the dollar, exports to Franceincreased in real terms.Similar to the breakdown of Israeli exports to Germany, exports to France aredecentralized without one dominant sector. The major industrial exports to Franceinclude: metals (totaled $152 million, up 4%), chemicals and oil distillates (totaled$96 million, down 20%), agriculture (amounted to $72 million, up 32%), machineryand equipment (totaled $56 million, up 2%), and rubber and plastic (amounted to $53million, down 8%), telecommunication equipment (fell 26% to $37 million), aircrafts(rose 51% to $35 million), food and beverages (increased 11% to $28 million) andmedical and surgical equipment which totaled $27 million, unchanged from last year.28
  • ItalyDuring the first half of 2012 Israeli exports to Italy fell 16 % from the same period of2011, totaling $616 million. As a result, Italy slipped to the 8th place among targetmarkets for Israeli exports, down one place from last year). The decrease in exports toItaly essentially stemmed from a drastic decline in agricultural exports, which fell83%, contracting from $85 million in the first half of 2011 to $15 million in the currentperiod, and a marked downturn in exports of chemicals and oil distillates, whichdropped 18% from $342 million in the first six months of 2011 to $280 million in thefirst half of 2012.Other industries that had an adverse effect on exports to Italy during the period were:electronic equipment (down 96% to $600,000 only), engines and electricalequipment (down 51% to $12 million), rubber and plastic (down 18% to $44million), and mineral products, which fell 28% to $23 millionIndiaAfter declining 4% in the first quarter of 2012, exports of goods to India rose 13% inthe second quarter, year-over-year. Overall, in the first half of 2012, exports to Indiarose 3% in dollar terms, totaling $600 million. During the period India ranked 9th amongglobal export targets and second among Asian markets, similar to its ranking in 2011.It is important to note that exports to India are highly volatile, changing from oneperiod to the next. Israel primarily exports minerals, chemicals and securityproducts to India – these products are supplied pursuant to new agreements andtransactions, renewal of supply contracts based on prior deals and/or exercise ofsupply options based on prior deals.Israel’s main exports to India in the first half of 2012 were chemicals and oil distillates.These exports, which accounted for one quarter of total goods exports to India betweenJanuary-June 2012, grew 81% to a total of $152 million. Most of the growth in exportsof chemicals and oil distillates was recorded in the first quarter (soaring 217% to $86million), while in the second quarter it decelerated to 16% year-over-year, amounting to$66 million.In the first quarter of 2012 exports of mineral products to India fell by a sharp 60%, as aresult of waning demand for minerals in India and a delay in supplies from the firstquarter to the second quarter. This decline is primarily due to the recent depreciation inthe Rupee and the change in subsidies to farmers – these led to the creation of excessinventory and to a drop in demand. In the second quarter there was a markedimprovement in exports of minerals to India, with a 54% growth year-over-year,to $36 million. However, a summary of the two quarters points to a 37% decreasein these exports to a total of $72 million. Based on ICL’s reports, during the thirdquarter shipments to India resumed and supply of minerals to India is expected togrow considerably. Accordingly, we expect a continued growth in exports to Indiain the third quarter of 2012.29
  • Another sector that notably affects exports to India is defense, which is also subjectto a great deal of volatility. Exports of industrial equipment for control andsupervision optical equipment and photographic instruments in the first half of2012 rose 36% year-over-year, totaling $61 million, exports of machinery andequipment rose 29% to $49 million, exports of instruments for measuring andnavigating leaped 155% to $20 million and exports of aircrafts soared from $120,000in the first half of 2011 to $9 million in the first half of 2012. On the other hand,exports of electronic equipment fell 71% (from $14 million in January-June 2011 to$4 million in the current six months).Exports of telecommunication equipment fell 42% during the first half of 2012 to atotal of $93 million.Another notable sector is pharmaceuticals whose exports soared 130% from the firsthalf of 2011, to $14 million.BrazilDuring the first half of 2012, Brazil climbed to the 10th place among Israel’s leadingexport markets, rising 6 places from last year. Exports to Brazil during January-June2012 totaled $587 million, growing 42% from the first half of 2011. Most of the growthin exports to Brazil is attributed to two sectors: minerals (potash) and chemicals andoil distillates, which together account for 68% of total exports to Brazil.Exports of minerals to Brazil in the first half of 2012 leaped 112% to $218 million(37% of total exports). Similar to the situation concerning exports to China and India,most of the change in the industry’s export levels stems from ICL’s business activity inthe country. During the third quarter of 2012 exports of mineral to Brazil isexpected to grow, owing to the supply of potash under contracts signed betweenICL and Brazilian importers. Consequently, exports of minerals to Brazil isexpected to keep growing and remain a driver of goods exports to Brazil in thequarter ahead.Exports of chemicals and oil distillates to Brazil in the first half of 2012 totaled 185million, after increasing 11% year-over-year. Machteshim-Agan, which holdsproduction facilities in Brazil, has considerable impact on chemical exports to thecountry.Apart from these two sectors, a positive trend was recorded by other exportingindustries: exports of telecommunication equipment rose 60% to $50 million, exportsof pharmaceuticals rose 62% to $28 million and exports of rubber and plastic soaredby 214% to $26 million. On the other hand, exports of machinery and equipment fell15% to $23 million and exports of metals decreased 11% to $17 million.30
  • Change in exports to key export markets – first half of 2012Rate of change in % year-over-year, exports of goods excluding diamonds* US – excluding pharmaceuticals** Source: the Exports InstituteTop 10 Exporters of Goods: Development in theExports and Comparison to Other ExportersTotal exports for the 10 biggest exporters of goods in 2011 came at $22 billion, andtheir weight in total exports of goods excluding diamonds was 47%, compared to 36%in 2007.In the first half of 2012, total exports for the 10 biggest exporters of goods amounted to$10.6 billion, down 4% year-over-year. The weight of this group in total exports ofgoods (excluding diamonds) remained unchanged from last year, at 47%.The exports of the four largest groups of exporters, as of the first half of 2012,accounted fore one third of total exports of Israeli goods (excluding diamonds),amounting to $7.5 billion. The weight of these exporters in total exports of goods(excluding diamonds) grew from 23% in 2007 to 34% in 2011. As stated, their weightin total exports of goods has not changed in the first half of 29012 year-over year.31
  • Change in the Shekel’s Exchange RatesExport data which are stated in dollars are, among others, affected by the frequentchanges in the dollar-euro exchange rate, and consequently, the shekel-euro exchangerate . We estimate the dollar’s weight in the developments of Israeli exports at 75%.In the first half of 2012 the Euro’s average rate was $1.297, 7.6 % lower than itsaverage rate in the same period of 2011, which was $1.403. This decline in the Eurovis-a-vis the dollar explains part of the contraction in the growth of Israeli exportsto EU countries.In the first quarter of 2012 the dollar-shekel’s average exchange rate was 3.77, up 1.3%from the average exchange rate in the fourth quarter of 2011 and up 4.7% from theaverage exchange rate in the first quarter of 2011. In the second quarter of 2012, thedollar-shekel’s average exchange rate was 3.82, up 11.1% year-over-year. In the firsthalf of 2012, the dollar-shekel’s average exchange rate was 3.80, 7.8% higher than itsaverage rate in the same period of 2011.The Shekel against the Dollar from the start of 2010: Av. 2011 $In the first quarter of 2012 the Euro-shekel’s average exchange rate was 4.94, rising bya marginal 0.4% from the first quarter of 2011. In the second quarter of 2012 the Euro-shekel’s average exchange rate was 4.91, down 1% year-over-year. In the first half of2012 the Euro-shekel’s average exchange rate was 4.92 – down 0.3% year-over-year.32
  • The shekel against the Euro, from the start of 2010 €Source: the bank of IsraelFor a more accurate measurement of the development in exchange rates, the Bank ofIsrael measures the real-effective exchange rate of the currency basket, which iscomposed of the shekel’s exchange rate against the currencies of Israel’s 30 maintrading partners, net of the effect of inflation differences vis-a-vis each country.During the second half of 2011, the shekel’s appreciation against the effective currencybasket came to a halt and the shekel began to lose strength, a trend that persisted in2012. For example, the real-effective currency basket at the start of the year (January-June) was 113.2 points – pointing to a 2% decline in the shekel’s value compared to thecurrency basket in 2010 and a 3.4% depreciation compared to the 2011 average.However, the real-effective exchange rate still points to a 13% increase from theaverage level in the years 2006-2007, which contributed to the rise in exports in theseyears up to the outbreak of the global economic crisis.It should be noted that each 5% decline in the real-effective exchange ratecontributes to a real 1% increase in Israeli exports, with an 8-14 months’ lag ineffect. An appreciation in the real-effective exchange rate leads to a similar effect,but in the opposite direction.33
  • The Currency Basket – Real-Effective: 1999 to June 2012Source: Bank of Israel34