India’s FY box trade robust despite challenges

      04/12/2019

Fiscal 2018-2019 has been a remarkably robust year for India’s emerging containerized trade, as government authorities and other stakeholders worked harder than ever to accelerate growth and productivity rates via infrastructure upgrades, digitization, pro-business reforms, and integrated logistics efforts. The Indian fiscal year runs from April to March.

An impressive 8 percent spike in containerized movement at the country’s major state-owned ports during the year reflects that renewed push. Combined major ports’ yearly throughput increased to 9.9 million TEU from 9.1 million TEU in 2017-2018. The 12 major ports cumulatively represent approximately 60 percent of containerized freight shipped in and out of India.

On the infrastructure front, the biggest capacity addition came from PSA International’s 2.4 million-TEU Bharat Mumbai Container Terminals (BMCT) at Jawaharlal Nehru Port Trust (JNPT), India’s busiest container harbor. With the new terminal having settled into a speedier operating rhythm after initial rail-handling hurdles, recent months have seen all JNPT terminals refocusing around productivity to impress liner customers with predictive gains for beneficial cargo owners (BCOs).

The January 2018 opening of Adani Ennore Container Terminal (AECT), about 15 miles north of Chennai, was another notable capacity expansion effort on the country’s east coast. AECT features a 400-meter (1,312 feet) quay, four rail-mounted quay cranes, 12 rubber-tire gantry cranes, and a capacity of 800,000 TEU annually in its first phase. A weekly intra-Asia call from Maersk Line in October last year provided a lifeline for the new eastern terminal after being a non-starter over carrier concerns tied to vessel-related charges at the port.

Despite continued general weak demand, throughput at all leading major container ports remained on an upward curve during the year, with JNPT leading the pack. The top port's annual volume hit an all-time high of 5.1 million TEU, a gain of 6.2 percent year over year, which translates into more than half of the total major ports’ countrywide traffic. This feat, in a hyper-competitive market environment saddled with excess capacity, is particularly significant.

The growth was led by APM Terminals’ Gateway Terminals India (GTI) with 2.04 million TEU, up from 2.03 million TEU in the prior year. PSA’s BMCT, in its first full year of operations since the opening in February 2018, handled 520,126 TEU, a good start, given the inevitable challenges confronted by a newcomer.

With two terminals at JNPT, DP World’s combined market share also gained traction, with volume rising 15 percent year over year to 1.5 million TEU. The company has lately been prioritizing its newer facility Nhava Sheva (India) Gateway Terminal (NSIGT) in an attempt to dodge tariff complications plaguing the other older unit, Nhava Sheva International Container Terminal (NSICT).

However, state-owned Jawaharlal Nehru Container Terminal (JNCT) took a heavy hit because of recent berthing window rearrangements by carriers for greater productivity benefits. As a result, JNCT’s throughput crashed 29 percent in the last fiscal year to 1.06 million TEU from 1.48 million TEU in 2017-2018, new data show.

The busiest east coast harbor, Chennai port, shipped 5 percent more containers in fiscal 2018-2019 than it did the year before to reach 1.6 million TEU, fighting against a new breed of private minor regional rivals, particularly Kattupalli and Krishnapatnam, and long-running productivity issues due to truck access problems.

There have also been volume gains at other smaller government-owned container ports — up 6 percent at Tuticorin (V.O. Chidambaranar), up 4 percent at Kolkata, up 7 percent at Cochin, and up 16 percent at Visakhapatnam. Fiscal 2018-2019 statistics relating to container trade via private minor ports, dominated by Adani Group terminals, were not immediately available.

The rollout of paperless gate systems and a radio-frequency identification (RFID) technology-enabled container tracking service has had a transformational effect across the country's supply chain, aiding cargo dwell time fluidity and improving transparency.

The RFID-based tagging and tracing tool enables supply chain stakeholders to track goods in transit through the port to inland container depots, container freight stations, and end-users, thus bringing down logistics costs on the back of improved predictability and optimization of cargo flows.

Given the shippers’ increasing push for real-time (or near real-time) shipment visibility, the government is doubling down on its investment in digital solutions by expanding the RFID offering to more container ports, including private ones, and streamlining port services via an advanced port community system. In addition, direct port delivery service — under which imports can be cleared directly from the wharf within 48 hours of landing at the port — is drawing tremendous shipper support, with JNPT transacting as much as 52 percent of its laden imports through the speedy channel in March.

Amid growing competitive pressures, supply chain providers in trade to and from India are also increasingly pursuing integrated container logistics solutions to supplement their traditional, niche offerings and establish a larger presence in the emerging market. For example, DP World, which holds six terminal concessions in India, is already working to extend its reach “beyond the terminal gates” to offer door-to-door logistics solutions through further investments in warehousing zones and railroads in the country.

“With the global competition and the need to reach far-flung destinations within stipulated time frames, modern businesses today are seeking to adopt an integrated and organized logistics approach,” Aditya Vazirani, director of Mumbai-based freight forwarder Robinsons Global Logistics Solutions, told.

India has built sufficient container capacity — currently pegged at 27 million TEU — but what it lacks is an efficient multimodal logistics network to minimize cargo transits to and from gateway ports. Although it is in the early stages of development, an ambitious government program to switch from a point-to-point transport system to a hub-and-spoke model should aid freight movement on low-volume corridors.

“Today, logistics costs in India account for 13 to 17 percent of the country’s GDP, which is nearly double [6 to 9 percent] the level to GDP in developed countries such as the US, Hong Kong, and France. Much of the higher costs could be attributed to the absence of efficient intermodal and multimodal transport systems. Moreover, warehousing has also been facing major challenges, leading to increased logistics costs that are borne by the end users and other stakeholders,” Vazirani added.