After acquiring deep-water ports at Dhamra, Krishnapatnam and Gangavaram on the country’s eastern coast, Gautam Adani is looking to wield control over coal cargo arriving on capesize ships — the biggest of the dry bulk cargo carriers.

Adani Ports and Special Economic Zone Ltd (APSEZ), the listed port operating unit of Adani Enterprises Ltd, has moved to levy what customers say is a “punitive charge” of $3 per tonne on capesize ship owners when they discharge only a part of the coal cargo from the vessels at any of these three ports and with a reduced draft the vessel proceeds to other ports such as Visakhapatnam, Paradip or Haldia to unload the balance cargo.

The $3 per tonne collected as “cargo lightening charge” will be levied on the full quantity of coal carried by the ship regardless of the quantity of cargo discharged from the ship. The $3 a tonne is also over and above the regular charges collected on the quantity discharged at the respective ports. Capesize ships can carry as much as 200,000 tonnes of dry bulk commodities.

In separate yet identically worded circulars, Gangavaram, Krishnapatnam and Dhamra ports said that the cargo lightening charge is “applicable to only cape vessels carrying coal as cargo having two or more port discharge” with Gangavaram or Krishnapatnam or Dhamra, as the case may be, not being the last port of discharge. The levy is applicable to the entire coal brought to the port on the capesize ship, it said.

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If the capesize vessel is discharging full quantity of coal cargo at the respective ports, then normal charges will be collected as per existing tariff.

APSEZ defends move

APSEZ has defended its move to collect the $3 per tonne “cargo lightening charges” stating that these ports have “developed infrastructure to handle deep draft cape vessels”. The charge is being collected “to maintain these facilities and depths” to serve customers, it added.

The $3 per tonne is collected from ship owners and not from cargo owners to discourage them from taking the balance coal to other ports such as Visakhapatnam, Paradip or Haldia for discharge. “APSEZ want monopoly over coal cargo arriving on capesize ships at Gangavaram, Krishnapatnam or Dhamra ports,” said a port industry executive with knowledge of the matter.

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“Adani does not want capesize business to go away from his hands to any other port. They want complete monopoly,” he said.

Commodity traders hit

The entities who are mainly hit by this levy are commodity traders (who buy and sell cargo) who haul coal in capesize vessels that fetches a freight advantage of $5-10 a tonne compared to panamax size ships.

Commodity traders bring 30-40 per cent of the total coal volumes consumed in the eastern region, the remaining quantities are sourced directly by end-users such as steel mills and power plants.

Fully laden capesize ships cannot call at Paradip, Haldia and Visakhapatnam ports (except one berth in Vizag port) due to depth restrictions. Hence, such vessels use Dhamra, Krishnapatnam or Gangavaram as their first port of call to lighten the load and reduce the ship’s draft before proceeding to dock at the depths available at Paradip, Haldia or Visakhapatnam ports.

Adani does not want that to happen; the firm wants the entire coal cargo arriving on capesize ships to be discharged at either of the three ports only, the executive said.

Port logistics factor

Multiple port discharges are resorted to by traders hauling coal on capesize ships because the entire cargo cannot be consumed in and around one port, with attendant risk on storage that adds to the cost. Bringing large quantities in one trip with freight advantage allows commodity traders to service multiple customers in different ports.

“It is better to discharge the coal in multiple ports and reduce the risk, so that consumers can take the cargo. Who will want to discharge 180,000 tonnes of coal in one port and wait for selling the cargo,” said the executive cited earlier.

Besides, the distance from the port to the consumption site also counts a lot in choosing the port of discharge. The entire port logistics depends upon the distance from the landing port to the consuming point.

In terms of proximity, Paradip is the closest port by rail, to several steel mills, power plants and other coal consumers in the hinterland but capesize vessels cannot call there due to depth restrictions.

“If they discharge the entire coal from capes at Dhamra port, consumers will have to spend extra money to haul it to their premises whereas, even if they lighten the cargo at Dhamra and bring it to Paradip port, it will still make economic sense. So, for a large number of coal consumers in the eastern region, Paradip is the most sought-after port,” the executive said.

By imposing a “cargo lightening charge” using the dominance from owning three deep-water ports, Adani is seen to be taking away the “flexibility” of traders to do multi-port discharges of coal to suit their requirements.

“It looks like Adani is punishing those who want to go from their port to another port with a punitive and debilitating charge,” said an executive with a commodity trading group based in Singapore.

“Adani is looking to prevent existing customers from going to any other port, making going to those ports impossible. The ship owner will not absorb the $3 per tonne, he will add it in his freight rate, making it costlier for the consumers or charterer of the ship,” the executive at the trading group said.

‘To deter commodity traders’

However, there are contradictory views from shipping executives on this move with some saying that Adani was trying to “discourage” commodity traders who were looking to “have the cake and eat it too”.

Adani has created deep draft ports for which traders are able to get $5-10 per tonne discounted freight (the current difference in freight between a panamax and a capesize ship is $10 a tonne), according to an executive with one of the big steel makers in Eastern India.

“Traders are bringing capesize ships to one of the Adani ports because it has created the infrastructure to accommodate such big ships. But, after partly unloading the cargo, they go elsewhere. Adani has invested huge funds to build capesize-compliant facilities which are helping the traders bring bigger parcels on a ship, helping get $10 per tonne freight discount in the process but they are not allowing Adani to enjoy the full share of cargo,” said the executive.

On the one hand, traders are trying to economise on freight by first unloading a part of the cargo at the deep-water port. After that, when the ship’s draft is reduced on lightening the cargo, they take it wherever they want, causing revenue loss to Adani ports, he said.

Besides, the Adani Group which also runs a successful trading business, may want to deter other traders through this levy.

The cargo lightening charge, according to the steel company executive, has not hurt major steel makers in the Eastern region because they bring coal mostly on panamax ships of 75,000-80,000-tonne capacity and few on capesize vessels “just to balance out their logistic costs”.

“Adani has given the traders a big jolt. If it had hit the major steel producers, they would not have kept quiet, they would have retaliated,” he added.

Opportunity for VGCB

Adani’s gamble, though, runs the risk of losing some capesize business if there is a nearby deep-water facility as in the case of Visakhapatnam and Gangavaram ports.

Vizag General Cargo Berth Pvt Ltd (VGCB), the terminal run by Vedanta Group at Vizag Port, which has the depth to accommodate capesize ships, handled at least four such big dry bulk ships that called to lighten the coal before proceeding elsewhere after APSEZ imposed the cargo lightening charge at nearby Gangavaram from April.

“It enhances the opportunity for VGCB to handle the lightening of capesize vessels carrying coal,” said a shipping industry executive.

“Gangavaram port is levying an extra $3 per tonne from ship owners if the coal cargo is lightened there. VGCB can accommodate cape vessels without any additional charges. So, it is an opportunity for VGCB,” he said.

“Otherwise, the entire coal business of traders on India’s eastern coast is gone,” he said noting, however, that VGCB alone cannot be an alternative to Adani ports for capesize ship calls.