Economic slowdown impacts coal import cargo in H1 FY20: Icra

Economic slowdown has impacted coal import cargo in the first half of this fiscal, as overall cargo growth at major ports registered a marginal growth of 1.9 per cent to 294 million tonnes, rating agency Icra said on Wednesday.

Healthy volume growth in container, crude and iron ore segments was offset by the decline in coal and some other bulk cargo volumes, it said.

"The volume growth at major ports has been impacted by 4 per cent fall in coal volumes - 63.6 MT vs 66.3 MT - and some decline in fertiliser and liquid volumes," Icra said in a statement.

Coal volumes at major ports grew 11 per cent in FY2019.

 

"The decline in imports is despite the fact that Coal India Ltd's dispatches have also fallen by 3 per cent during this period to 247 MT from 241 MT. Thus, the slowdown in coal imports is most likely attributable to the economic slowdown in recent months which has brought down the overall demand and is likely to impact the domestic port sector," K Ravichandran, Senior Vice President and Group Head - Corporate Ratings, Icra said.

Also, thermal power generation has increased during the first five months by 4-5 per cent, indicating that the decline in thermal coal demand is driven by other consuming industries. Some of the growth in coal demand is also stifled by the impact of higher generation from newly added renewable capacities. Systemic inventory with users is also possibly down on account of lower ordering following the anticipation of a further slowdown in demand.

Over the long-term, a sustainable pick-up in industrial activity and power demand will be crucial for the sustenance of healthy coal imports as domestic production also ramps up to meet the incremental demand, it said.

"If demand from power sector remains tepid and industrial demand also remains slack, there is a possibility of further pressure on coal import volumes. Over the long term, a sustainable pick-up in industrial activity and power demand will be crucial for the sustenance of healthy coal imports as domestic production also ramps up to meet the incremental demand," Ankit Patel, Vice President and Co-Head - Corporate Ratings, Icra said.

He said CIL's supply is likely to increase every year by 5-7 per cent at least and this will continue to be a risk for port players that are highly dependent on coal volumes for optimal utilisation of their port capacities.

In FY19, total cargo handled at Indian ports had registered a moderate increase of 5.9 per cent to 1,280 million tonnes from 1,209 million tonnes during FY18. Major ports handled 699 MT, whereas non majors handled 581 MT.