Ports

Subdued cargo growth hits ports, puts pressure on pricing

Post By : Karvi Rana
Post Date : July 12, 2021
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The Slowing cargo growth and lower capacity utilization have intensified inter-port competition, putting pressure on the industry. Experts believe that the oversupply capacity and increased inter-port capacity Are putting major pressure on the pricing.

In FY21, the total consolidated cargo handled by Indian ports witnessed a decline of 5.4percent and reached 1,247 million tonnes (mt), as compared to that of FY20.

The cargo handled by the Centre-owned major ports also declined by 4.6 percent to 673 mt from 705 mt in FY20, as per the Indian Ports Association (IPA).

The overseas cargo and the coastal cargo handled at major ports also decreased by 2.6 percent and 11.4 percent in FY21 as to in FY20, respectively.

While the Non-major ports also contracted by 6.2 percent and handled 575 mt in FY21, over FY20 volumes of 614 mt, according to the Ministry of Ports, Shipping and Waterways.

The overseas cargo and coastal cargo handled at non-major ports during FY21 decreased by 4.3 percent and 17.3 percent respectively.

Adani Ports and Special Economic Zone Ltd (APSEZ) in its annual report for FY21 said, “FY21 resulted in almost 5% ports volume reduction at a pan-India level, which resulted in lower ports capacity utilization across the sector. Lower capacity utilization increased inter-port competition for cargo and (put) pressure on pricing,”

It further added that the increased competition could affect the growth and margins.

Ever since the outbreak of the COVID an erratic demand pattern is being witnessed, port industry executives believe that this behavior could severely dampen the port utilization and revenue predictability.

Despite the potential to bolster cargo volumes, the volume of the port in India stays very much aligned to the Exim trade and showcases overall weak growth, said an industry consultant.

In the recent past, the industry is struggling with port volumes which have been subdued for a while as cargo volumes have not matched capacity additions. The oversupply of capacity has translated into a substantial regional over-capacity, becoming a key concern for the port industry.

Furthermore, the inter-port competitions have become a huge challenge and are leading port operators to rethink business strategies.

Apart from the challenges faced in the port infrastructure, there are challenges on the commodity front also as the government dwells on local production of thermal coal and fertilizers, particularly urea, which is reducing the demand for importing these commodities. Agri commodities are also likely to face a downside.

Source: Hindu Business line

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