Indian public ports likely to miss targets as COVID-19 adds to demand pains

Gate 2 at KPT, Kandla port in Gujarat, India. Credit: Mukund Maku/Wikipedia

Cargo tonnage at major public ports in India will likely fall short of government expectations for fiscal year 2019–20, which ends 31 March 2020, as the unanticipated coronavirus disease 2019 (COVID-19)-related turmoil deepened an already existing demand slowdown.

India has 12 federal government-owned gateway ports dotting its east and west coasts. As the latest traffic figures suggest, these ports are expected to handle about 700 million tons of cargo during the year, lower than the 725-million-ton annual throughput target, which would have represented a growth rate of 4% over the previous year.

Total country-wide major port volume has reached 643 million tons from April 2019 through February, edging up 1.4% year over year (y/y). Conservatively, industry observers expect major ports to handle 65 million tons during March.

Of the 12 ports, the Port of Kandla (renamed Deendayal) is poised to become the top scorer, having racked up 111.4 million tons of cargo in the first 11 months, up 7% from 104 million tons a year earlier. The second spot is held by the Port of Paradip, at 102.6 million tons, up 4%; followed by Visakhapatnam, at 67 million tons, up 13%; Jawaharlal Nehru Port Trust (Nhava Sheva), at 62 million tons, down 2.8%; Mumbai, at 56 million tons, up 2.5%; Chennai, at 43 million tons, down 11%; New Mangalore, at 34 million tons, down 11%; V.O. Chidambaranar (Tuticorin), at 33 million tons, up 5%; Cochin, at 31 million tons, up 6%; Ennore (Kamarajar), at 29 million tons, down 8%; and Mormugao, at 15 million tons, down 9%.

By segment, approximately 34% of cargo movements during the year have consisted of petroleum and petroleum products, at 217 million tons, up 2.7% from 211 million tons. Meanwhile, the second-largest contributor, containerized traffic, has stood at 135 million tons, up 2% y/y.

In February, total cargo tonnage increased by 4.6% to 57.2 million tons from 54.7 million tons a year earlier.

According to domestic market research company ICRA, the COVID-19 outbreak has had an adverse impact on Indian export-import trade, given the scale of bilateral trade between India and China.

“On the whole, the impact of COVID-19 is a negative for the shipping sector and any recovery will be dependent on the demand recovery in the Chinese industrial segment, following the abatement of COVID-19,” ICRA said in a recent report.

“Many industries like chemicals, dyes and pigments, pharmaceuticals, textiles, electronics, auto, etc. could witness short-term supply disruptions due to a production shutdown in China. In turn, the reduced economic activity could result in a slowdown in bulk consumption and indirectly also affect bulk imports like coal, crude, and other commodities. Ports that have a significant exposure to the affected cargo categories could see an impact on their cargo volumes in the near term.”

There is a general view that the full impact of ongoing trade dislocations, fuelled by COVID-19, will play out in March and months ahead.

The emergence of privately built minor cargo terminals – blessed with multiple structural advantages – have already presented a major challenge for Indian major ports. Given that context, the government has approved a new law to transform all major port trusts into more autonomous bodies.

While that remodelling is a positive step, it remains to be seen if major ports will be able to rebuild market share anything close to past levels in a market that is being increasingly dominated by the Adani Group, which has already positioned itself at 11 locations across the country.