Domestic ports turn the tide, register growth amid economic slowdown

File photo of a port
Amid slowing economic growth in multiple segments such as banking, automobile, steel, and even services, ports alone are busting the downturn. 

 
The country’s port sector has witnessed growth in cargo volumes.

Among private players, Adani Port's cargo grew by 16 per cent year-on-year to 57 million tonnes in April-June, ahead of brokerage estimates of 54.5 million tonnes.

Essar Ports, on the other hand, saw its cargo go up 17 per cent in April-June on the back of the contributions of Hazira, Salaya and Vishakhapatnam ports.

The company handled bulk cargo for the steel, power, and cement sectors.

Major ports too witnessed growth in cargo during the same period. The country’s 12 major ports handled 236 million tonnes, up 2 per cent from the equivalent period last year.

* From previous year. Chennai and JNPT or Nhava Sheva being container ports do not handle iron ore and coal bulk cargo
“Power consumption has increased at a very good rate for the first four to five months (April onwards). Due to this, there is double-digit thermal coal growth in imports. It is one of the main items that have led to volume growth,” Rajiv Agarwal, chief executive officer and managing director, Essar Ports, told Business Standard.

In the April-June quarter, Adani Port’s coal and bulk cargo grew by 38 per cent and 33 per cent, respectively. “We are reducing our captive coal usage and instead switching to increasing imports of thermal coal because prices globally have dropped significantly,” said Satish Pai, managing director, Hindalco Industries.

The Aditya Birla Group company uses thermal coal for its alumina refinery power plant. Normally, the company sources its thermal coal via linkages, e-auctioning, captive and imports.

“Apart from coal, iron ore is another commodity for which exports and coastal movement has increased. The slowdown in steel sector could be on realization front but from steel production perspective, volumes are intact and so the requirement of iron ore,” said Agarwal.

Private port players are of the view that the cargo growth is a combination of fresh cargo, repeat customer and cargo pulled from competition.

“Our Salaya bulk terminal handled all fresh cargo. It was mainly coal, limestone and petcoke,” said Agarwal.

According to the Indian Ports Association data for April-July 2019, the country’s thermal coal traffic handled saw a drop of 10 per cent from the same period last year.

“It will be hard to give break up in terms of how much was new cargo versus how much was pulled from the major ports. The number you should look at is that all India ports grew by 8 per cent versus we grew by 18 per cent, so there is definitely some cargo which has been pulled from competition,” said Karan Adani, chief executive officer, Adani Ports, at the earnings conference call last week.

Port players remain optimistic about cargo growth and see economic growth bounce back in the next couple of quarters.

“In the next two quarters things will bounce back. The current gloomy situation is global and is also due to some corrective action in domestic financial world. But in the next two quarter things will bounce back and settle,” said Agarwal.

Adani Ports, on the other hand, had guided 10-12 per cent growth in cargo in FY20 (led by incremental 9 million tonnes of coal and 10 million tonnes of container cargo).

However, due to a weak EXIM outlook, the management remained cautious about its guidance. “I think the way things are looking, we are looking at the lower end of the 10 per cent (growth) rather than the higher end,” said Adani. 



Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel