Container volumes at Indian ports could drop by 16% in FY21 as pandemic clips consumer demand

Container cargo volumes at Indian ports are expected to decline by as much as 16 per cent in FY21 as the global health crisis sent consumer demand plummeting with a cascading impact on supply chain.

“The lockdown-induced container trade decline, equivalent to around 60 days and 30 days to high/very high traffic risk and moderate-to-high traffic risk geographies, respectively, suggests a contraction of 13-16 per cent in container traffic for Indian ports in fiscal 2021,” CRISIL Research, a unit of CRISIL Limited (CRISIL), said in a note.

“However, given the uncertainty about the Covid-19 fallout, risk of second wave, tighter or prolonged lockdowns, people movement controls and social distancing across India and key trade partners can mean further downside,” it added.

The first signs of a sharp dip in container trade across India’s ports have surfaced with volumes at Jawaharlal Nehru Port Trust (JNPT) - India’s biggest container gateway- plunging by about 37 per cent in April, year on year basis.

In April, the imports at JNPT were about 20 per cent lower, while exports were around 55 per cent lower, year on year, as shortage of trucks and drivers hit long-lead hinterland movement for imports and exports.

Weaker production due to sparingly available manpower, besides transportation and clearance challenges, has further impacted exports, CRISIL Research said.

India’s GDP is expected to witness a sharp correction, with a projected growth rate of 1.8 per cent in FY21 compared with 5 per cent last fiscal, with risks tilted to the downside scenario of zero GDP growth.

India, which has significant container volumes linked with severely hit Covid-19 countries, is at risk of a sharp dip in container trade.

The US (estimated 10 per cent share in laden volumes) and Europe, including the UK (around 18 per cent), are regions with very high traffic risk; the Middle East (around 10 per cent) and Rest of Asia (about 23 per cent) have high traffic risk; while China (13 per cent) is in the moderate-to-high traffic risk category.

Many liners also skipped calls at JNPT and Mundra port, in April, due to congestion and paucity of exports.

“It seems that overall cargo de-growth at ports, will lead to deferment of any greenfield investments, in the excess capacity ridden sector, by at least 6-8 quarters,” it stated.

Going forward, recovering trade of essentials (such as agricultural products, perishables and pharmaceuticals) will provide some respite. Volumes for discretionary items, (such as electronics, readymade garments, and automobile parts) will, however, remain lacklustre.

CRISIL Research reckons that the extent to which the pandemic is controlled globally and, more importantly, the stance that major economies take towards imports will be critical to the pace of recovery in container trade post-2020.

“However, given that Covid-19 has badly hurt economies and consumer sentiment, and there is likely to be an attitudinal shift against globalisation, a slow and gradual recovery (against a V-shaped recovery witnessed after the 2008 global financial crisis) in container trade seems more plausible,” it added.

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