What plagues some of the ports

Ac­cord­ing to the ICRA re­port, con­tainer vol­ume growth at non-ma­jor ports posts CAGR of 20 per cent in five years com­pared to the ma­jor ports that post a CAGR of 2 per cent dur­ing the same pe­riod.

Cargo Talk - - Report -

Con­tainer vol­umes at non-ma­jor In­dian ports like Mun­dra, Pi­pavav, Hazira and Katu­palli ports have reg­is­tered a com­bined CAGR of 20 per cent (from 1.7 mil­lion TeUs to 4.5 mil­lion TeUs) for the last five years (2012-17) as against a mea­gre CAGR of 2 per cent (from 7.7 mil­lion TeUs to 8.4 mil­lion TeUs) by ma­jor ports in this pe­riod. Thus, ma­jor ports have un­der-per­formed in com­par­i­son to non-ma­jor ports dur­ing this pe­riod. Over­all con­tainer vol­umes at In­dian ports reg­is­tered a CAGR of about seven per cent for the last five years.

Ac­cord­ing to K. Ravichan­dran, Se­nior Vice-Pres­i­dent and Group Head, Cor­po­rate Rat­ings, ICRA, “This un­der-per­for­mance can be at­trib­uted partly to de­lays in ca­pac­ity ad­di­tions at ma­jor ports, es­pe­cially, on the western coast, where nearly the en­tire in­cre­men­tal vol­umes have been ab­sorbed by non-ma­jor ports. More­over, non-ma­jor port op­er­a­tors have been ag­gres­sively woo­ing the con­tainer lines with bet­ter rates and ser­vice lev­els. Nonethe­less, ma­jor ports con­tinue to ac­count for a ma­jor­ity of the con­tain­ers han­dled at about 65 per cent, al­beit on a de­clin­ing trend, and of­fer a sig­nif­i­cant op­por­tu­nity for port lo­gis­tics play­ers. Go­ing for­ward, com­mis­sion­ing of ca­pac­ity ad­di­tions at the En­nore port (al­ready com­mis­sioned in June 2017), JNPT and other ports should re­sult in some shift back to ma­jor ports and sup­port vol­ume growth for the port lo­gis­tics play­ers op­er­at­ing at ma­jor ports.”

Thus, ICRA be­lieves that the higher con­tainer vol­umes at ma­jor ports will ex­pand the mar­ket for the port lo­gis­tics play­ers and ease the com­pet­i­tive pres­sures for play­ers op­er­at­ing at the ma­jor ports over the next three to four years.

As re­gards near term out­look for the port lo­gis­tics sec­tor, con­tainer lo­gis­tics sec­tor is ex­pected to dis­play mod­est growth over­all in the cur­rent fis­cal as the in­ter­na­tional trade vol­umes are likely to re­main sub­dued. The credit pro­file of the CFSs which are lo­cated near ports wit­ness­ing sub­dued growth, hav­ing high com­pet­i­tive in­ten­sity and where Di­rect Port De­liv­ery (DPD) model is gain­ing trac­tion would re­main im­pacted un­less these play­ers dif­fer­en­ti­ate them­selves based on ser­vice qual­ity or di­ver­sify their op­er­a­tions to other ports. The near-term out­look for the Con­tainer Train Op­er­a­tors (CTOs) also re­mains sub­dued due to high com­pe­ti­tion from the road freight op­er­a­tors. “How­ever, not­with­stand­ing the cur­rent slow­down in eco­nomic growth, longterm prospects for these seg­ments re­main favourable as con­tainer traf­fic vol­umes grow. Be­sides, port lo­gis­tics in­dus­try should ben­e­fit from favourable de­mand en­vi­ron­ment over the long term due to on­go­ing projects such as ded­i­cated freight cor­ri­dor (DFC) and Del­hiMum­bai

This un­der­per­for­mance can be at­trib­uted partly to de­lays in ca­pac­ity ad­di­tions at ma­jor ports, es­pe­cially, on the western coast

in­dus­trial Cor­ri­dor (DMIC), as well as open­ing up of new busi­nesses seg­ments like 3PL and cold chains,” Ravichan­dran added.

K. Ravichan­dran Se­nior Vice-Pres­i­dent and Group Head, Cor­po­rate Rat­ings, ICRA

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