The upcoming container capacity on Indian shores is threatening the
prospects of existing players whose capacities are already idling. With Adani
Ports setting up container capacity at Vizhinjam on the west coast, and Dhamra
,Ennore ports and Kattupalli on the east, a fight for volumes is in the offing.
Together, the four container terminals will add a capacity of over 6 million
TEUs in another three years.
The economy has been slowing since January-March 2016 and growth hit a
three-year low of 5.7 per cent in the April-June quarter, indicating slow
growth in trade.
The eastern hinterland is neither a major destination nor originator of
containerised cargo, comprising intermediate or finished goods, so there is
hardly any scope for container cargo growth along the eastern coastline,
according to a spokesman of Drewry Maritime Research. Moreover the centre has
invested huge sums in building a dedicated freight corridor from Mumbai to
Delhi. The corridor to east culminating at Kolkata has no matching port
capacity. The centre is also dragging its feet in development freight corridors
in southern India. While the work in dedicated freight corridors in Mumbai
Delhi and Ludhiana Kolkatta are moving at break neck speed, the corridors in
southern India being considered in bits and pieces will take years for takeoff.
On the West coast, with Gujarat, Maharashtra and Delhi the present central
government is making large investments in infrastructure during the last three years
to make it a large market and hence the scope for container cargo growth is
Due to poor investments in infrastructure especially in manufacturing
states like Tamil Nadu and Telengana, capacity utilisation on the east coast is
expected to be minimal over the next three to four years. The annual growth in
containerisation of cargo in India has been 8-10 per cent over the last few
years. Container cargo growth is a function of the gross domestic product and
is dependent on a country’s merchandise trade.
“Greater export or import can help increase the share of containerisation,
but it depends on how the economy fares,” according to a spokesman DP World.
The company suffered badly due to diversion of container cargo from Chennai to nearby
ports managed by Alanis. DP world manages a terminal in Chennai port for the
last several years but its capacity utilisation has been low. It has been
pressing the Tariff authority of India for revision of tariff but Tamp has not
conceded its demand. It started levying additional charges on imported
containers but the trade is resisting it. TAMP has also asked the Chennai port
to direct the DP world terminal among others to stop levying additional charges
on the trade
With Adani Ports and Special Economic Zone (APSEZ) adding container
capacities in the east and south, a mismatch between container terminals and
cargo is imminent in the next few years.
“Adani is expected to pull the southern trade to itself with the kind of
capacity addition it is making,” said a consultant. At Ennore, APSEZ is setting
up a capacity of 1.4 million TEUs and Dhamra will have the potential to handle
more than 100 million tonnes of dry bulk, liquid bulk, break bulk, containerised
and general cargo. Adani's Ennore terminal will take at least two years before
it achieves its full capacity'
“The Krishnapatnam container terminal is also pulling cargo from the nearby
Chennai port by offering competitive rates compared to the private terminals
operating at Chennai port. So each container port will look to increase its
container business from the existing volume and this could cause capacity to
idle on the east coast. While the established and entrenched private container
terminals in the east coast remain a contented lot though volumes are slipping,
private ports like Katupalli and Krishnapatnam are adopting aggressive
marketing strategies to attract more containers.
Container terminals are a capital intensive business and you need have a
30-year horizon. If companies have that strength they can sustain. Container
operators in India have been changing their business strategy because of the
economic slowdown and excess capacity in the industry. Gujarat Pipavav’s
promoter APM Terminals is seeking an exit. Gujarat Pipavav had three years ago
lowered its capex plans for the container business and had diversified into the
crude oil and car segments.
DP World, too, is planning to diversify into bulk, liquid terminals and
logistics. The company has plans to invest $1 billion in India, of which a
major portion will be in logistics. Logistics will be our main focus and then
the container business, which is our core. Our extended businesses will
comprise bulk and liquid,” a spokesman of DP world said.