High Capacity addition to impact Container Port operators : ICRA Research

Posted by Daily Shipping Times on 22-12-2017        Tweet

MUMBAI : High capacity addition on both the West and the East Coasts will impact the business performance of container terminals in the medium-term, a report said recently.

On the West Coast, the over-capacity concerns stem from the JNPT, the largest container port in India already handling over half of the volumes, planning to double its capacity with the addition of the fourth terminal.

Competing private terminals on West Coast will be impacted over the next three years because of JNPT's plans, domestic ratings agency Icra said in a report.

On the East Coast, the Chennai-Ennore-Kattupalli- Krishnapatnam cluster, which has seen significant capacity being installed, is also likely to face strong competition for volumes over the next 3-5 years, it said.

"Pressure on realisation and margins is imminent as the lines drive a hard bargain on rates," its Group Head K Ravichandran said.

"While the recent capacity creation in these regions is backed by prediction of strong demand growth, increase in export-import cargo movement would be gradual and in the interim, terminals could witness pressure on volumes," he added.

Given the high leveraging of some private sector port operators and concerns on returns, he said "consolidation trends could gather further momentum going forward".

On the non-container side, including bulk, liquid and other cargo, the agency said the decline in coal volumes in the first eight months of the fiscal is a "concern" over the long term.

"A prolonged decline in coal import requirement in the absence of diversification into other cargo categories can impact the returns for such port sector players," it said.

In the near term, the cargo and cash accrual outlook for the port sector overall is positive, it said.