OUTPACING GLOBAL GROWTH

Cab­o­tage re­lax­ation, in­creased coastal cargo move­ment, grow­ing con­tainer­i­sa­tion of cargo are all cu­mu­la­tively con­tribut­ing to the sharp rise in con­tainer growth in In­dia de­spite the chal­lenges of over ca­pac­i­ties at In­dian ports and slug­gish ex­ports. Conta

Maritime Gateway - - Contents -

Cab­o­tage re­lax­ation, in­creased coastal cargo move­ment, grow­ing con­tainer­i­sa­tion of cargo are all cu­mu­la­tively con­tribut­ing to the sharp rise in con­tainer growth in In­dia de­spite the chal­lenges of over ca­pac­i­ties at In­dian ports and slug­gish ex­ports. Con­tainer traf­fic is ex­pected to drive the over­all vol­ume growth in the next five years.

In­dia edged past France and be­came the sixth-largest econ­omy in the world in 2018. Al­though the In­dian econ­omy de­cel­er­ated in 2017 due to short-lived shocks like de­mon­eti­sa­tion and the im­ple­men­ta­tion of the Goods and Ser­vices Tax (GST), it bounced on the back of strong fun­da­men­tals. Bi­lat­eral trade with China was at a his­toric high in 2017 de­spite many ten­sions be­tween the coun­tries. In­dia’s con­tainer port traf­fic grew by 13 per cent in 2017, fol­low­ing

11 per cent growth in 2016. All In­dian ports recorded pos­i­tive growth dur­ing the year, bar­ring one or two ports. Mun­dra’s traf­fic grew by more than 20 per cent, and JNPT’S traf­fic inched up by 4.8 per cent in 2017. On the east coast, Chen­nai in­creased its port through­put by 1.6 per cent. Fur­ther­more, Kr­ish­na­p­at­nam - a new port - has been grow­ing at a fast pace.

Mar­ket Seg­men­ta­tion 2018

Ma­jor vs Non-ma­jor ports

Ma­jor ports have lost a sig­nif­i­cant share of con­tainer traf­fic to non­ma­jor ports dur­ing the last decade. The mar­ket share of non-ma­jor ports has surged by more than five times in the pre­vi­ous 13 years from 2005. The mar­ket share of ter­mi­nals (in terms of traf­fic) op­er­at­ing in ma­jor ports plum­meted from 92 per cent in 2005 to 59 per cent in 2017. The rapid ex­pan­sion of pri­vate ter­mi­nal op­er­a­tors in non-ma­jor ports di­verted a sig­nif­i­cant chunk of cargo to these pri­vate ports. The mar­ket share (in terms of con­tainer traf­fic) of non-ma­jor ports col­lec­tively rose to a whop­ping 41 per cent in 2017 from a pal­try 3 per cent in 2005. Kr­ish­na­p­at­nam and Katu­palli on the east coast of In­dia, op­er­a­tional since 2013, have amassed sig­nif­i­cant vol­ume in four years. These ports have been ad­ding to the growth story of non-ma­jor ports, pre­vi­ously driven by Mun­dra and Pi­pavav. In 2017, among non-ma­jor ports, only Pi­pavav has reg­is­tered a 3 per cent de­cline in con­tainer traf­fic. Neigh­bour­ing port Mun­dra han­dled 22.4 per cent more boxes over 2016 and Hazira’s con­tainer traf­fic in­creased by 27.6 per cent

East coast ports vs west coast ports

Ports on the west coast dom­i­nate the con­tainer in­fra­struc­ture and through­put in In­dia. More than 70 per cent of the coun­try’s con­tain­ers are han­dled at the west coast ports. We ex­pect this dom­i­nance to con­tinue, though han­dling at east coast ports has ac­cel­er­ated in re­cent years with new pri­vate ports.

East­bound vs west­bound cargo flow

The rise in de­pen­dency on east­ern coun­tries was mainly due to In­dia’s in­creased sourc­ing of goods from China and other Asian coun­tries. This co­in­cides with Chi­nese en­try in the World Trade Or­gan­i­sa­tion (WTO) 2001. While In­dia’s de­pen­dency on the east as the ex­port des­ti­na­tion did not change much, but as the im­port source, the im­por­tance of the east in­creased dras­ti­cally. 49 per cent of In­dia’s im­port was from the east in 2017, which was just 30 per cent in 2000.

Ma­jor con­tainer­ised/con­tainer­is­able exim cargo

For anal­y­sis, we have di­vided all traded com­modi­ties into 33 ma­jor cat­e­gories, such as Phar­ma­ceu­ti­cals, Fab­ric/yarn, Steel Prod­ucts, Reefer Food Prod­ucts and Ready­made Gar­ments (Rmg)/tex­tiles. As we do not have pre­cise def­i­ni­tions of con­tainer­ised and non-con­tainer­ised cargo from any au­thor­i­ta­tive source, the data has some sub­jec­tiv­ity built in.

The RMG and Tex­tile sec­tor has tra­di­tion­ally main­tained its top po­si­tion in In­dia’s ex­port bas­ket. Ex­ports in this sec­tor rose from $4.7 bil­lion in 1997 to $22.6 bil­lion in 2017, a nearly five-fold in­crease in the last 20 years. Chem­i­cals fol­lowed Rmg/tex­tiles with an ex­port value of $20 bil­lion in 2017, from a mere $2 bil­lion in 1997. Other sec­tors that wit­nessed a mas­sive surge in In­dia’s ex­ports are Steel Prod­ucts, Reefer Food Prod­ucts and Fab­ric/yarn.

Fig­ure 5 de­picts the share of ma­jor cargo types in the over­all ex­ports from In­dia.

On the im­port side, the Elec­tric and Elec­tronic Goods seg­ment is the largest prod­uct cat­e­gory im­ported into In­dia. In the cal­en­dar year 2017, In­dia im­ported $46 bil­lion worth of elec­tri­cal and elec­tronic goods com­pared with just $18 bil­lion in

2007. Ris­ing in­come lev­els, as well as the in­ven­tion of user-friendly tech­nol­ogy, com­bined with economies of scale in the pro­duc­tion process in the Far East­ern coun­tries, have led to high de­mand for elec­tronic goods in In­dia and else­where.

Ad­vanced mech­a­ni­sa­tion and in­dus­tri­al­i­sa­tion in the coun­try have pushed im­ports of ma­chin­ery and spare parts to a new level. The coun­try im­ported $29 bil­lion worth of ma­chin­ery and spare parts in 2017 over $19 bil­lion a decade ago. In In­dia’s im­port bas­ket, Chem­i­cals and Steel Prod­ucts oc­cupy third and fourth po­si­tions re­spec­tively, fol­lowed by Poly­mer and Poly­mer prod­ucts.

Trade lanes

Ma­jor trade part­ners

China’s po­si­tion as an ex­port part­ner has strength­ened tremen­dously in the last 20 years - the coun­try, which stood 13th in 1997, stood at the third po­si­tion in 2017– within two decades. The US has been the pre­ferred des­ti­na­tion of In­dian ex­ports and has re­mained at the top for many decades. The UAE, which stood at the fourth po­si­tion in 1997 be­came the sec­ond pre­ferred ex­port des­ti­na­tion by 2007 and main­tained its rank un­til 2017. In­dia, in 2017, ex­ported more than a quar­ter of its global ex­ports to the US, China and the UAE.

Viet­nam is per­haps the only coun­try that has shown tremen­dous in­ter­est in In­dian prod­ucts - the high­est im­prove­ment in the last 20 years – from 38th po­si­tion in 1997 to fourth in 2017. The coun­try ranks first in In­dia’s ex­ports of Reefer Food Prod­ucts. About 26 per cent of In­dia’s to­tal ex­ports of Reefer Food Prod­ucts are des­tined for Viet­nam.

In­dia’s ex­ports are more di­ver­si­fied than im­ports. Im­ports from the top 20 coun­tries ac­counted for nearly 81 per cent of In­dia’s to­tal im­ports in 2017. By com­par­i­son, the top 20 ex­port des­ti­na­tions (coun­tries) con­sti­tuted only 67 per cent of In­dia’s global ex­ports.

Top com­mod­ity-part­ner ma­trix

Rmg/tex­tile is the most ex­ported com­mod­ity by In­dia, the bulk of this com­mod­ity is ex­ported to

North Amer­ica (28 per cent) and the re­main­ing to West­ern Europe.

Chem­i­cals are the sec­ond largest ex­ported prod­uct. Al­though the US is the top ex­port des­ti­na­tion for In­dian man­u­fac­tured chem­i­cals, In­dia ex­ports a con­sid­er­able amount of chem­i­cals to China. On the im­port side, In­dia im­ports chem­i­cals mostly from China, Saudi Ara­bia, the US and Sin­ga­pore. These four coun­tries ac­count for more than half of In­dia’s chem­i­cal im­ports, in terms of value.

In­dia is one of the top 10 steel ex­porters of the world. In 2013, steel prod­ucts worth $18.4 bil­lion were ex­ported, mak­ing it the third high­est com­mod­ity ex­ported. Steel prod­ucts were also the fourth largest com­modi­ties im­ported by In­dia in 2017. While the US, Italy and the UAE are the three top ex­port des­ti­na­tions for In­dian steel prod­ucts, China, Ko­rea and Japan are the top three im­ports sources.

For im­ports, the top two items are Elec­tri­cal & Elec­tronic Goods and Ma­chin­ery and Spares. China with its in­put cost ad­van­tage of­fers prod­ucts that are about 30-50 per cent cheaper than In­dia. Even though it hurts many man­u­fac­tur­ers in In­dia, the vol­ume of im­ports from China has in­creased manifold in the last few years. In 2017, In­dia im­ported $27.3 bil­lion worth of elec­tri­cal and elec­tronic goods from China, which is nearly 60 per cent of its global im­ports. The other ma­jor source of im­port is South Ko­rea.

Reefer Food Prod­ucts is an­other cat­e­gory that is ex­ported in large quan­tity from In­dia, mostly des­tined for coun­tries in South East Asia, the US and the UAE. Mean­while, In­dia also im­ports plenty of Reefer Prod­ucts. This prod­uct cat­e­gory ranks fourth on In­dia’s ex­ports, whereas it ranks sev­enth on the im­ports com­mod­ity list. Im­port sources for reefer food prod­ucts are more di­ver­si­fied than ex­ports.

In­dian Tran­ship­ment Sce­nario:

Since last few years, it was quite ev­i­dent that In­dian ports have built huge ca­pac­i­ties not only to serve EXIM cargo but also to re­cap­ture the tran­ship­ment vol­ume which has been han­dled by neigh­bour­ing ports. There are not much ef­fec­tive strate­gies im­ple­mented by ma­jor ports still, but on the other side pri­vate port op­er­a­tors are striv­ing to bring back the lost cargo from neigh­bour­ing for­eign ports. Adani Mun­dra Port, Adani Hazira Port and Cochin Port on west coast and Kr­ish­na­p­at­nam and Visakha­p­at­nam port on east coast have shown im­pres­sive re­sults in han­dling tran­ship­ment vol­umes.

Some ma­jor In­dian re­forms in the last two years, such as com­pet­i­tive pric­ings, in­fra­struc­ture upgra­da­tions, and lib­er­al­ized cab­o­tage rules, have in­duced in­ter­est among port op­er­a­tors, who are now reap­ing ben­e­fits of han­dling tran­ship­ment at In­dian coast in or­der to di­min­ish tran­ship­ment at for­eign ports in FY 2017 and FY 2018.

Adani Mun­dra port, be­ing the big­gest pri­vate player by through­put in In­dia, reg­is­tered around17 per cent of tran­ship­ment cargo in its to­tal con­tainer­ized cargo han­dled in FY 2017-18, Val­larpadam In­ter­na­tional con­tainer trans­ship­ment ter­mi­nal (ICTT) is able to han­dle 6 per cent of trans­ship­ment and big­gest ma­jor port, Jawa­har­lal Nehru Port Trust (JNPT) han­dled mea­gre 1.3 per cent of trans­ship­ment vol­ume.

Visakha­p­at­nam, Kr­ish­na­p­at­nam, Hal­dia, Kat­tupalli, Chen­nai Ports on east coast can trans­form as trans­ship­ment hubs, but in­ad­e­quate steps have been taken to tap the mar­ket, ex­clud­ing Kr­ish­na­p­at­nam which han­dled al­most 50 per cent of its an­nual cargo in tran­ship­ment, while ar­rest­ing the cargo which used to be han­dled at Sin­ga­pore ear­lier. Hal­dia Port should also ex­plore mea­sures to at­tract cargo from Bangladesh via in­land wa­ter­ways op­tions for trans­ship­ment. Mun­dra, Hazira, Pi­pavav and Cochin Ports on west coast have the po­ten­tial to trans­form them­selves into “trans­ship­ment hubs” and, in turn, in­crease their freight han­dling to in­crease the ca­pac­ity uti­liza­tion at ports.

Af­ter cab­o­tage re­lax­ation, for­eign­flagged car­ri­ers can carry EXIM laden and empty con­tain­ers be­tween In­dian ports with­out any spe­cific per­mis­sion or li­cense, and also In­dian gov­ern­ment is keen in pro­mot­ing ma­jor ports and key pri­vate ports on the east and west coast to take ad­van­tage of ex­pected de­mand growth in a more favourable mar­ket en­vi­ron­ment.

Re­forms in ship­ping in­dus­try in this FY 2017-18, fur­ther trig­ger In­dian ports to tap trans­ship­ment cargo in or­der to re­cap­ture the cargo which is presently han­dled at Colombo Port,

Sri Lanka, and Sin­ga­pore.

Nev­er­the­less, it is very early to es­ti­mate how much ca­batoge re­lax­ation could help the trade in at­tract­ing more trans­ship­ment cargo at In­dian ports. On the flip side, few ports are still strug­gling with port side con­ges­tion, pric­ing, draft and in­fra­struc­ture is­sues. Un­less these is­sues are ad­dressed, it is dif­fi­cult to gauge the trans­ship­ment sce­nario at In­dian ports.

Adani Mun­dra Port han­dled to­tal vol­ume of 4,114,544 TEUS in FY 2017-18 with trans­ship­ment vol­ume of 17 per cent (in­cludes DP world vol­umes). Joint ven­ture of Adani Group and Mediter­ranean Ship­ping Co (MSC), Adani In­ter­na­tional

Con­tainer ter­mi­nal Pri­vate Lim­ited (AICTPL)IS stand­ing ahead of peers with high­est per cent of trans­ship­ment vol­ume of 32 per cent in its to­tal through­put. Adani Mun­dra port han­dled 426,994 TEUS of trans­ship­ment cargo in FY 201617, which is around 12.3 per cent out of its to­tal vol­ume of 3.45 mil­lion TEUS. In FY 2015-16, Mun­dra moved 366,217 TEUS of trans­ship­ment, out of the 3 mil­lion TEU han­dled.

The first ever trans­ship­ment port in In­dia called Val­larpadam ICTT was in lime­light quite for some time for sev­eral rea­sons like ex­clu­sive cab­o­tage re­lax­ation and for be­ing closer to in­ter­na­tional ship­ping route, but these ben­e­fits still could not reap de­sired re­sults. This ter­mi­nal has wit­nessed minis­cule year-on-year growth de­spite sig­nif­i­cant uptick in to­tal through­put. Val­larpadadam ICTT han­dled 555,812 TEUS in FY 2017-18, in­cludes 35,363 TEUS of trans­ship­ment, com­pared with 31,498 TEUS of tran­ship­ment cargo from 491,087 TEUS in FY 2016-17. Vi­sion of DP World’s In­ter­na­tional Con­tainer Trans­ship­ment Ter­mi­nal (ICTT) is not achieved yet but the Dubai-based op­er­a­tor DP world is keen in im­prov­ing its num­ber.

Navayuga Con­tainer Ter­mi­nal (NCT) has an ex­po­nen­tial growth in vol­ume han­dled along with trans­ship­ment vol­umes. This ter­mi­nal han­dled 212,466 TEUS of tran­ship­ment from 479,552 TEUS of through­put in FY 2017-18. Ad­vanced in­fra­struc­ture, high draught and strate­gic com­pet­i­tive pric­ing seem to be the key driv­ers in stag­ger­ing rise in trans­ship­ment cargo. Other ma­jor ports on east and west mainly fall be­hind as they are un­able to serve the trade with the ex­pected lower port and ves­sel re­lated charges. High­est con­tainer vol­ume han­dling ma­jor port on East coast, Chen­nai Port is also un­able to serve the trans­ship­ment yet. Tran­ship­ment at Colombo Port, Sri Lanka and at Port Klang in Malaysia costs 2-3 per zcent high when com­pared with In­dian ports like Visakha­p­at­nam, Kr­ish­na­p­at­nam and Chen­nai. As per our es­ti­mates, around 1.5-2 mil­lion TEUS of south In­dian trans­ship­ment cargo is cur­rently han­dled via South­east Asian ports an­nu­ally.

Up­com­ing Trans­ship­ment hubs: Tamil Nadu's ma­jor and pri­vate port names were in the race for es­tab­lish­ing or cre­at­ing the best in­fra­struc­ture to re­cap­ture the cargo. The vol­ume will grow sub­stan­tially in the forth­com­ing years, as a re­sult of the new lib­er­al­ized cab­o­tage rules but tough com­pe­ti­tion among ex­ist­ing and

up­com­ing tran­ship­ment play­ers can def­i­nitely give ship­per an ad­van­tage to get com­pet­i­tive price even­tu­ally help the In­dian econ­omy to ben­e­fit.

Deep­wa­ter, green-field trans­ship­ment port at Enayam in

Tamil Nadu en­com­passes a three­p­hase de­vel­op­ment with a to­tal in­vest­ment of about `27,500 crore. Phase I, in­volv­ing two berths with a 400-me­ter quay length each and an an­nual ca­pac­ity of 1.6 mil­lion teu will be de­vel­oped with `6,575-crore. Phase I is en­vis­aged to start op­er­a­tions by 2020. Adani Ports’ un­der-con­struc­tion Vizhin­jam project could pres­sur­ize the ex­ist­ing Val­larpadam ICTT fur­ther.

Its first phase is de­signed to han­dle

1.8 mil­lion teus per year, and it is sched­uled to open in 2019.

East coast cargo of In­dia is mostly tran­shipped at Colombo fol­lowed by Sin­ga­pore port, Port Klang and Jebel Ali. Lack of for­ward think­ing by pre­vi­ous govern­ments, lethar­gic moves by ports to tap cargo and in cre­at­ing ap­pro­pri­ate in­fra­struc­ture and ag­gre­ga­tion of suf­fi­cient exim cargo to at­tract main­line ves­sel to call, are the pri­mary rea­sons for In­dian cargo be­ing tran­shipped at for­eign ports.

Cab­o­tage re­lax­ation af­fects Cab­o­tage re­lax­ation will def­i­nitely spurt the trade growth across In­dian coast while cre­at­ing a healthy com­pe­ti­tion within the EXIM feed­er­ing trade. With the com­pe­ti­tion, feed­er­ing rates may slice down, help­ing ex­porters and im­porters with more com­pet­i­tive pric­ing. Re­lax­ation will also fil­lip the trade, while boost­ing In­dian ports and ter­mi­nals. In­dian ports are los­ing rev­enue of $2-3 mil­lion a year by not al­low­ing for­eign ves­sels to ply on lo­cal routes. On the flip side, with post cab­o­tage re­lax­ation, for­eign car­ri­ers mostly get ben­e­fit­ted in mov­ing empty con­tain­ers be­tween In­dian ports. For­eign con­tainer lines trans­shipped 3,500 teus for 10 days in May 2018 af­ter Ship­ping Min­istry eased cab­o­tage rules on May 21 2018, fol­lowed by 11,599 teus in June 2018, and around 17,000 teus in July. Few ship­pers ex­pressed that the money saved by for­eign main­lines on car­ry­ing emp­ties has not been passed on to the trade.

Colombo Port, de­pen­dent highly on In­dian cargo con­tain­ers has slashed trans­ship­ment rates by 9.5 per cent af­ter In­dia lifted cab­o­tage re­stric­tions. The trans­ship­ment charges ap­proved by TAMP for con­tainer ter­mi­nals at ma­jor port trusts is about $57 per teu, while it is $80 per teu in Colombo and $110 in Sin­ga­pore. On the other hand, a ship­ping line pays `11 lakh more in ves­sel-re­lated charges for call­ing at Val­larpadam ICTT com­pared to Colombo.

In June, about 3,000 laden con­tain­ers got tran­shipped from In­dian ports. In July, it was close to about 5,500 con­tain­ers. As the num­bers are grow­ing ex­po­nen­tially, we es­ti­mate that around 10 per cent of what was be­ing tran­shipped out­side the coun­try will be able to come back to In­dian ports. In­dian ma­jor port’s exim con­tain­ers, depend­ing upon var­i­ous for­eign ports, in the last fi­nan­cial year de­clined 2 per cent to 2,780,000 teus from 2,840,000 teus in the pre­vi­ous year, in spite of 3 per cent growth in In­dian to­tal con­tainer through­put at ma­jor ports dur­ing the same year. In­dian trans­ship­ment cargo rep­re­sents 30-35 per cent of the ma­jor ports’ com­bined vol­ume for FY 2016-17.

In­dian Cargo Tran­shipped at for­eign hubs:

Colombo Port cap­tured 42 per cent of In­dian freight in FY 2017-18, or 1.3 mil­lion teus, com­pared with

1.1 mil­lion teu (40 per cent share) in 2016-2017 and 1,190,000 teus (42 per cent) in FY 2015-16. Other coun­try trans­ship­ment ports also cap­tured mod­est vol­umes of In­dia. Sin­ga­pore is the sec­ond-largest hub of In­dian trans­ship­ment cargo, as it han­dled 465,000 TEUS or 15 per cent, down from 21 per cent pre­vi­ously in FY 2016-17 and 17 per cent in FY 201516, fol­lowed by Port Klang, Malaysia, at 237,000 TEUS or 7.5 per cent, down from 9.3 per cent in FY 201617, com­pared with 8 per cent in FY 2015-16. Jebel Ali, UAE, han­dled In­dian trans­ship­ment cargo of 90,000 TEUS, hov­er­ing around 3 per cent in FY 2017-18 as well as in FY2017 and FY2016. Oth­ers, at 1mil­lion TEUS are 32 per cent up in FY 2018 from 25 per cent in FY 2017. This also points at In­dian ship­pers’ grow­ing use of new, emerg­ing hub ports, such as Khal­ifa (Abu Dhabi), Salalah (Oman), and Ha­mad (Qatar) on the strength of im­proved re­gional con­nec­tiv­ity.

Port of Colombo mov­ing ag­gres­sively en­hanc­ing ca­pac­ity and other in­fra­struc­ture by slash­ing down prices to at­tract more trans­ship­ment cargo, could give tough com­pe­ti­tion to In­dian ports. All of these moves by in­dian and for­eign tran­ship­ment hubs even­tu­ally ease In­dian ship­pers while re­duc­ing lo­gis­tics costs fur­ther.

Ship­ping ca­pac­ity Av­er­age ves­sel size at In­dian ports

With the in­crease in cargo vol­ume and the pro­lif­er­a­tion of pri­vate ports in In­dia, the num­ber of ser­vices call­ing has in­creased over the years. Thirty-seven main­line ser­vices called at In­dian ports in 2011, which rose to 45 in July 2018.

In­dia is on the main east-west trade route (Asia-europe) and the av­er­age ves­sel size call­ing at In­dian ports has also in­creased. The av­er­age ves­sel size at In­dian ports was 3,715 teu in 2011, which strength­ened to 6,239 teu in 2018. An il­lus­tra­tion of av­er­age ves­sel sizes for ma­jor trade lanes is shown in the fig­ure 7 above.

This sixth edi­tion of In­dian Con­tainer Mar­ket An­nual Re­port has been de­vel­oped by Mar­itime Gate­way in col­lab­o­ra­tion with Drewry Mar­itime Re­search and Con­sult­ing firm.

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