Maersk sees India Container growth accelerating

Posted by Daily Shipping Times on 24-07-2017        Tweet

COPENHAGEN / NEW DELHI: India’s container trade is expected to grow at a faster pace in the coming months after local regulatory developments impacted import growth in the first quarter, Maersk Line stated in a trade survey released recently.

The world’s largest container line, which accounts for roughly 20 percent of India’s total containerized freight, said the Country’s first-quarter container growth slowed to 7 percent from 10 percent year over year, as the import growth rate was down to 5 percent from 13 percent previously although exports remained steady, with an 8 percent increase that mirrored last year.

“This dip in import growth was due to piling up of inventory in the market post demonetization and a lack of clarity around Good and Services Tax [GST]. It is noteworthy that despite the looming threat of the current geopolitical environment worldwide on global trade, India has been able to maintain its growth trajectory,” said Mr. Franck Dedenis, Maersk Line’s Head of West Central Asia trades.

The company said India’s trade growth has been way above the global average of 4 to 5 percent in the last two quarters, aided by a rebound in the Country’s exports to the Far East, North America, and Latin America regions. 

There has also been a spurt in demand for Indian goods from Africa and other parts of Asia, particularly from Sri Lanka, for heavy and construction materials for infrastructure development.

Though India’s export trade with Europe has generally remained stagnant, movements to Algeria, Italy, and Spain have experienced healthy pickups. Much of the demand from Algeria has been for Indian frozen beef and auto parts, leading to 48 percent year-over-year growth in the first quarter.

“Traditionally, [the] United Kingdom is India’s largest export market in the region. However, a spending binge in the holiday season last year followed by rising prices post Brexit and news of France potentially cutting off ties with [the] European Union have affected consumerism negatively in the United Kingdom, which has resulted in this drop. Additionally, the appreciation of the [Indian] rupee against the euro has adversely impacted India's exports to the EU bloc,” Dedenis said.

On the other hand, India’s refrigerated or temperature-controlled cargo trade has been steadily growing, with the South Asian nation emerging as the larger beef exporter compared with Vietnam. That buoyant demand can be attributed to China sourcing Indian beef through Vietnam markets, lower prices, and proximity to key markets in Southeast Asia and West Asia, according to the report.

“To stay ahead in technological innovation in refrigerated containers, Maersk Line recently became the first shipper to invest in Star Cool reefers by Maersk Container Industry, which will help power cold chain transparency,” the Danish carrier said.

Studies by industry analysts showed India’s exports of processed food and related products during fiscal year 2010 to 2011 through 2015 to 2016 increased at a compounded annual growth rate of nearly 12 percent, reaching $16.2 billion in value. That momentum is driving heavy private investments in cold chain logistics infrastructure developments and establishment of strategic partnerships between global transport providers and domestic peers.

Maersk appears bullish on long-term growth prospects for the emerging economy on the back of ongoing policy reforms, including the July 1 GST rollout, and a moderate turnaround in global demand that is expected to push global container volumes up by 2 to 4 percent in 2017.

“India’s export-import trade forecast remains strong, and we expect growth in imports in the second quarter as the effects of demonetization are expected to fade away. The Country is also expected to benefit from the predicted improvement in global trade,” Dedenis said. “But these prospects come with a caveat; the recovery will be much slower if protectionist policies and restrictions on imports persist.” 

Container volumes at India’s Major Ports increased 8.2 percent year over year in the first two months of fiscal year 2017 to 2018, reaching 1.5 million TEU compared with 1.4 million TEU previously, according to port statistics compiled by JOC.com.