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Market share gains continue to help railways curb the impact of the sharp slowdown in container trade. Export-import (Exim) container rail volumes dipped 18% in May, far slower than the 34% year-on-year fall in container volumes at major ports, data compiled by Antique Stock Broking Ltd show.

The data resembles the trends in April, when Exim container traffic on railways fell 8%, slower than the 33.8% dip in container traffic at major ports. “Market share of railways remained high at ~30% in May 2020 vs 25-26% in FY20," Nomura research said in a note.

Graphic: Satish Kumar/Mint
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Graphic: Satish Kumar/Mint

The market share gains can help container rail operators such as Container Corp. of India Ltd (Concor) minimize the impact on its business volumes. The stock gained 4% on Thursday.

“For Concor, Exim constitutes ~85% of revenue and hence its May volume decline should be closer to 15-20%. This, combined with April’s 8-9% dip in Exim container rail volumes, could lead to 13-14% volume fall in Q1 FY21E. We believe this is still better than what the market had initially anticipated when the lockdown began," analysts at Edelweiss Securities Ltd said in a note. That said, it has to be seen how long railways can continue to hold on to market share gains.

With governments easing lockdown restrictions and transport traffic on roads slowly returning, the share of rail in Exim container trade softened sequentially in May (vis-à-vis April). From 31.7% in April, share of rail Exim container volumes eased to 29.7% in May, points out Nomura research. Further, an analysis of e-way bill generation trends by Edelweiss Securities indicates a notable improvement in truck movement in recent weeks. This can cap market share gains by railways in Exim trade. Even so, availability of manpower and truck drivers remains a challenge.

While this can help railways maintain competitive advantage for some time, the general slowdown in economy and trade will continue to weigh on overall business volumes for both ports and container rail operators. “Reported trade data might show improvement in the months ahead as lockdown restrictions are gradually eased, but we expect year-on-year declines to continue at least until September," add analysts at Nomura.

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