Major ports post muted growth as coal volumes slide 4% in Apr-Aug period

In corresponding period of FY19, coal cargo had risen by 11%; Overall throughput growth ports at 1.9%

The shadow of economic slowdown loomed over coal cargo movement through major ports. Between April and August, the cargo throughput growth at major ports was muted at 1.9 per cent as coal volumes slid four per cent year-on-year.

In the corresponding period of FY19, coal cargo had risen by 11 per cent. Apart from decline in coal shipments compared with last year, some fall was also observed in fertiliser and liquid cargo.

K Ravichandran, senior vice president and Group Head - Corporate Ratings, ICRA said, “The decline in imports is despite the fact that Coal India Ltd’s dispatches have also fallen by three per cent during this period to 247 million tonnes (mt) from 241 mt. Thus, the slowdown in coal imports is most likely attributable to the economic slowdown in recent months which has brought down the overall demand and is likely to impact the domestic port sector.”

“Also, thermal power generation has increased during the first five months by 4-5 per cent indicating that the decline in thermal coal demand is driven by other consuming industries. Some of the growth in coal demand is also stifled by the impact of higher generation from newly added renewable capacities. Systemic inventory with users is also possibly down on account of lower ordering following the anticipation of a further slowdown in demand”, he added.

As per ICRA, if the demand from power sector remains tepid and industrial demand also remains slack, there is a possibility of further pressure on coal import volumes. Over the long term, a sustainable pick-up in industrial activity and power demand will be crucial for the sustenance of healthy coal imports as domestic production also ramps up to meet the incremental demand. CIL’s supply is likely to increase every year by five to seven per cent at least and this will continue to be a risk for port players that are highly dependent on coal volumes for optimal utilisation of their port capacities.

“If demand from power sector remains tepid and industrial demand also remains slack, there is a possibility of further pressure on coal import volumes. Over the long term, a sustainable pick-up in industrial activity and power demand will be crucial for the sustenance of healthy coal imports as domestic production also ramps up to meet the incremental demand. CIL’s supply is likely to increase every year by five to seven per cent at least and this will continue to be a risk for port players that are highly dependent on coal volumes for optimal utilisation of their port capacities”, said Ankit Patel, vice president and Co-Head - Corporate Ratings, ICRA.

Container volume growth has also slowed down to six per cent as compared to 11 per cent in FY2019 indicating some sluggishness in trade movement.

In FY19, total cargo handled at Indian ports had registered a moderate increase of 5.9 per cent to 1280 mt from 1209 mt during FY18. Both major ports and non-major ports contributed to the growth, recording a 2.9 per cent and 9.8 per cent growth in volumes respectively. Major ports handled 699 mt, whereas non majors handled 581 mt. Major ports fell short by only one per cent on the Ministry of Shipping target of 704 mt for FY19 mostly due to the underachievement of ports with traditionally high iron-ore volumes like Mormugao and lower than expected volume ramp up at Jawaharlal Nehru Port Trust (JNPT) from new container handling capacity.