East coast container terminals may lie idle

Adani adding capacity as economy, trade growth slow

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 and Ennore ports on the east, a fight for volumes is in the offing. Together, the three container terminals will add a capacity of over 6 million TEUs, or twenty-foot equivalent units, a measure for container traffic.

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 Subrata K Behera, manager, ports and containers, Drewry Maritime Research. 

On the west coast, with Gujarat, Maharashtra and Delhi being large markets, the scope for container cargo growth is better. “Due to such a production-consumption layout, capacity utilisation on the east coast is expected to be minimal over the next three to four years,” Behera added. According to industry executives, 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,” said Captain Anil Singh, senior vice-president and managing director, Indian subcontinent, DP World.

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.

“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. Vizhinjam in Kerala will be a transshipment container terminal. “The Krishnapatnam container terminal is also pulling cargo from the nearby 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,” Behera said. 

“Container terminals are a capital intensive business and you need have a 30-year horizon. If companies have that strength they can sustain,” Singh added. 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,” Singh said.