‘Container operators to be hurt by excess capacity’

Source: The Hitavada      Date: 21 Dec 2017 10:08:41


Business Bureau,

HIGH capacity addition on both the west and the east coasts will dent the business performance of container terminals in the medium-term, a report said on Wednesday.
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. 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.“Pressure on realisation and margins is imminent as the lines drive a hard bargain on rates,” its group head K Ravichandran 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 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 first eight months of the fiscal is a “concern” over the long term.