Iron ore volumes weigh on cargo traffic; expected to rebound soon2 min read . Updated: 09 Dec 2010, 09:12 PM IST
Iron ore volumes weigh on cargo traffic;expectedtoreboundsoon
Cargo traffic at India’s 12 bigger ports grew by a marginal 0.8% year-on-year (y-o-y) during April-November (down 5.6% sequentially) on account of the 15.4% y-o-y decline in iron ore volumes and moderate growth of 2.4% y-o-y reported by the petroleum oil and lubricant products. Iron ore exports have been declining since July after the ban on exports by Karnataka from 10 of its ports. In November 2010, iron ore exports were down 37.4% y-o-y and 38.0% sequentially at 4 million tonnes (mt) against 6.3 mt in November 2009 and 6.4 mt in October 2010.
The ban by the Karnataka government directly affected port volumes where iron ore is a principally handled commodity—Mangalore (down 13.1% y-o-y), Ennore (down 12.3% y-o-y) and Paradip (down 2.2% y-o-y). However, the decline was balanced by the 17.2% y-o-y and 13.2% y-o-y increase in fertilizer volumes and container tonnage, respectively.
Stable container volumes
As per the Indian Ports Association data for November, container volumes at 12 bigger ports registered a growth of 12.6% y-o-y, but declined 3.0% sequentially. The Jawaharlal Nehru port, which handles around 61% of the container volumes, witnessed an increase of 9.4% y-o-y while posting 1.6% decline on sequential basis. The Chennai port, which handles around 16% of the container volumes, saw an increase of 21.3% y-o-y, but a sequential decline of 14.3%.
The container data for FY11 this far indicates that volumes have stabilized at higher levels albeit on a low base. During April-November, the bigger ports handled 5 million twenty-foot equivalent units (TEUs) against 4.4 million TEUs during the corresponding period of last year, a y-o-y growth of 12.3%. We expect the ports to sustain the monthly run rate and surpass the 7 million TEU mark set for FY11.
Company-wise, we estimate Container Corp. of India Ltd to post 10.0% growth in export-import volumes in FY11 against management’s guidance of 12%.
Exports picking up
In October, India’s exports stood at ₹ 79,763 crore (up 15.3% y-o-y), whereas imports were valued at ₹ 1.23 trillion (up 1.5% y-o-y). Cumulative value of exports for the April-October 2010 period stood at ₹ 5.56 trillion (up 20.3% y-o-y), while the cumulative value of imports stood at ₹ 8.89 trillion (up 19.7% y-o-y) for the period.
Thus, the trade deficit increased by 18.7% y-o-y to ₹ 3.33 trillion during April-October. The revival in export-import trade has been visible in the overall port throughput as well as container volumes.
We believe that sustained growth in the Indian economy with gross domestic product growth expected at 8.5% over the next few years as well as emergence of India as a global outsourcing hub will facilitate the country’s container trade. In the current decade, container traffic registered 12% compounded annual growth rate (CAGR) compared with the 9% CAGR posted by the total traffic at the major ports. We expect this trend to continue and container traffic to register 11% CAGR over the next five years, driven by the addition of new container terminals and increased containerization.
Edited excerpts from a report by Angel Securities. Comment at firstname.lastname@example.org