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February 26, 2018 location Mumbai

Containers to drive port traffic growth in the next 5 years

Segment to log 6-8% CAGR, 300 bps over that of overall pie, while coal traffic flat-lines

CRISIL Research expects the container segment to cushion port traffic growth in the next five years as coal, the mainstay until last fiscal, logs a sedate pace.


Port traffic is estimated to log a compound annual growth rate (CAGR) of 3-5 % in the five years through fiscal 2022, a notch down from 4.4% in the last five years.


The moderation would be mainly due to coal. In the last five years, port traffic growth was led by a surge in coal imports, especially at non-major ports. In the next five years, coal traffic is expected to remain flattish as an increase in coastal traffic due to increased production is offset by a corresponding fall in imports.


By contrast, container traffic growth is estimated to cruise at 6-8%, riding on improvement in export-import trade in sectors including chemicals and automotive/ancillaries. Incremental container traffic from upcoming terminals at the Jawaharlal Nehru Port Trust terminal, Vizhinjam, Ennore and Dhamra is expected to further augment this growth.


Says Prasad Koparkar, Senior Director, CRISIL Research, “Over the five years through fiscal 2022, as container traffic growth outpaces other segments, its share in total traffic handled at Indian ports is expected to increase to 19% from 16% now. On the other hand, coal which accounts for 22% of the total traffic, is expected to see a dip in its share to about 19%.”


For the petroleum oil and lubricant (POL) segment, which has a share of 35%, traffic growth is expected to be subdued at 1-3% CAGR in the next five years as throughput is expected to be range-bound for most refineries, barring a few such as IOCL-Paradip and BPCL-Kochi.


As for iron ore, which accounted for ~6% of port traffic, growth in traffic is expected to recover from the downslide seen till fiscal 2016. The recovery would be gradual, though, at a CAGR of 2-4% in the next five years, primarily due to the cap of 20 MT imposed on mines in Goa, where most of the export-oriented reserves of iron ore are situated.


Meanwhile, Indian ports are expected to see capacity additions of about 325-375 MT in the next five years, riding on new container handling facilities coming up at JNPT as well as greenfield projects such as the transhipment terminal at Vizhinjam.


The container segment is expected to add the bulk of the capacity. In value terms, however, the POL segment is expected to be the major contributor, accounting for 44-45% of the total investments expected in ports over fiscals 2017-2022, followed by the container segment with 25-26%. Investments in the POL segment are expected to be driven by capital-intensive LNG and LPG terminals at the Ennore, Dhamra, Mundra and Dahej ports, among others.


Says Binaifer Jehani, Director, CRISIL Research, “As new container facilities come up, utilisation in the container segment is expected to drop to 55% in fiscal 2019 from 61% currently. However it is expected to see a slight recovery by fiscal 2022, aided by improvement in Exim trade. Utilisation for the coal segment, too, is expected to decline as overall traffic growth remains flat and capacities are added at major ports on the eastern coast in anticipation of their potential for coastal traffic.”


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