High capacity additions in both state owned ports as well as private ports
on both the west and the east coasts will dent the business performance of
container terminals in the medium-term, a rating agency report said.
On the west coast, the over-capacity concerns stem from the state-run 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 terminals at Mundra, Pipavav, Hazira and three existing JNPT
terminals will be hit over the next three years because of JNPT's plans,
domestic ratings agency Icra said in a report. With prime minister's penchant
for setting up projects in Gujarat, Kandla port will see massive investment in
container handling facilities in the coming years
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. Chennai port
alone has an installed cargo handling capacity of 130 million tons while the
port handled 51 million tonnes of cargo last year.
Gone are the days when Chennai port handled the requirements of four
states. At present there are four modern ports in and around Chennai.
The pressure on realisation and margins is imminent as the lines drive a
hard bargain on rates," a spokesman of the rating agency said. While the
recent capacity creation in these regions is backed by prediction of strong
demand growth, increase in exim 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".
He, however, warned that credit profiles could come under pressure on
account of any leveraged merger and acquisition transactions, recurring cargo
related setbacks or any adverse movement on tariff related litigations.
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. The government had resisted coal
imports but had to give in when the coal inventory in thermal power stations
became hand to mouth in recent months. The stations had two to three days
stocks last months but things have improved as railways rushed coal stocks to
plants in southern India,
"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.
near term, the cargo and cash accrual outlook for the port sector overall is
positive, it said.