Port congestion threatens to derail recent boom in exports

Suresh P Iyengar Mumbai | Updated on August 05, 2021

Ship availability hit by quarantine norms; pile-up of goods is leading to default of export commitments

The fast recovery in corporate earnings across sectors, led largely by booming exports, is under threat due to congestion at ports and rising shipping costs. The delay in shipments is leading to a pile-up of goods at ports and default of export commitments.

The development has also hit the import of raw material as the availability of ships has become uncertain due to the compulsory quarantine imposed by various countries. The sharp rise in exports in the last few months was partly due to an increase in terms of value rather than volume.

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For instance, JSW Steel’s sales volume in the June quarter was down 11 per cent at 3.61 million tonnes against 4.06 mt in the March quarter, as the company attempted to increase exports due to weak domestic demand. The company has accumulated 1.20 lakh tonnes of steel at the port and could not meet its commitment.

Seshagiri Rao, Joint Managing Director, JSW Steel, said most companies in other sectors (textiles, pharmaceuticals and chemicals) were also dependent on exports and this was leading to congestion at ports.

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“Today there are no ships available for exports. The turnaround time has gone up by 30 per cent due to quarantine and delay in unloading due to lack of people at the port,” he said.

Unless quarantine restrictions are eased the cost will remain higher and limit exports. Port congestion is also impacting coking coal imports as ships are queuing up, said Rao.

Siddhartha Rajagopal, Executive Director, Cotton Textiles Export Promotion Council of India, said exporters are facing huge problems on account of container shortage even as exports have become uncompetitive with the sharp rise in freight rates adding to the cost.

“This is a matter of serious concern for exporters and, if not addressed at the earliest, will have an adverse impact on the overall exports this fiscal,” he added.

Achal Lohade, Ports and Logistics Analyst, JM Financial Institutional Securities, said there has been a delay in import of raw material the last few months and companies are adjusting to this by keeping larger inventories than usual to avoid disruption in production.

S Ranganathan, Head of Research, LKP Securities, said that, despite having the logistics to handle consignments, ports continue to remain congested.

Published on August 05, 2021

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