Indian container cargo to grow at 8% in FY25 amid Red Sea crisis: CareEdge Ratings

New Delhi: Indian container cargo volume is expected to grow by 8% at 342 million tonnes (mt) in FY25, amid the risk of a prolonged Red Sea crisis, CareEdge Ratings said on Thursday.

The slated connection of the Dedicated Freight Corridor to Jawaharlal Nehru Port Trust (JNPT) in FY26, alongside capacity additions by ports, is expected to drive growth in container volumes over the medium term, the ratings agency said in a sectoral report.

Going forward, significant adverse movement in charter rates impacting cargo volumes and vessels addition by shipping lines shall be key monitorables, it said.

Coal cargo throughput

The agency expects coal cargo throughput at ports to grow at a CAGR of 3-4% from FY24 to FY26, despite an anticipated decline in coal imports by 2-3% due to increased domestic coal production. The share of coastal cargo is expected to rise from 33% in FY24 to 42% by FY26, as per the report.

Also Read: Impact of Red Sea crisis on trade will be seen in FY25, says think tank

“This growth will primarily be driven by the coastal movement of coal along the eastern coast, complemented by added capacities and synergistic benefits," said Maulesh Desai, director, CareEdge Ratings. The government's focus on building infrastructure for sectors like steel and cement and enhancing multimodal connectivity under the Maritime Amrit Kal 2047 vision, also supports the expected increase in coastal movements at ports.

Coal throughput witnessed healthy growth from 292mt in FY22 to 367mt in FY23 representing growth of 26%. The growth in throughput was supported by increased power generation from thermal plants by 6% to 1059.9 billion units. Against this, the imported coal volume registered a year-on-year (y-o-y) growth of 18% to 249mt in FY23.

However, the volume growth was also driven by increased coastal volumes of coal. Coastal volumes have risen from 80mt in FY22 to 118mt in FY23 registering 47% growth.

During FY24, y-o-y growth in coal throughput was ~9% which mirrored the increase in thermal power generation by 9%. This supported the increase in domestic coal production and continued coastal coal volumes on a high base of FY23.

Coastal throughput is expected to increase from 60mt in FY21 to 131mt in FY24 reflecting a healthy compound annual growth rate (CAGR) of around 30%, the report said. The same was largely driven by an increase in cargo movement on the eastern coast with the ramp-up of overall volumes at Paradip, Gangavaram, Krishnapatnam, Dhamra and Gopalpur ports. Contribution of coal cargo of the overall coastal volumes has increased from 22% in FY21 to 33% in FY24.

Trade routes

“The Red Sea crisis has led to an increase in voyage span by 15-20 days, in addition to higher freight rates," said Desai. However, the capacity liners' readiness to expand container capacity—owing to healthy profitability by chartering additional vessels, cascading capacity from other regions, and accelerating fleet renewal—bodes well for balancing the increased transit times. The impact on cargo will primarily affect food grains and other perishable items, along with freight-sensitive or low-value cargo, which is estimated at 10-15% of container volumes. Going forward, a significant movement in charter rates that could impact cargo volumes and addition of by shipping lines will be a key monitorable.

India relies on the Suez Canal route for its trade with European countries, North Africa, and the Americas, which collectively account for about 35% of India's total foreign trade, primarily in the container segment. However, the impact on cargo will primarily affect food grains and other perishable items, along with freight-sensitive or low-value cargo, which together constitute 10-15% of the total volumes.

India’s maritime sector is represented by the 12 major ports and more than 200 non-major ports along the 7,500 km of coastline. Overall, cargo throughput at Indian ports is at its all-time peak at 1,539mt for the financial year ended 31 March 31 2024 representing 7% growth over FY23. Cargo throughput for FY21-24 was also healthy with a CAGR of 7%.

Resilient economic activity, increasing demand & consumption of major commodities, declining shipping freights and traffic recovery post covid were the prominent growth drivers, CareEdge Ratings said.

Cargo at Indian ports is dominated by 3Cs. i.e. crude oil (termed as Petroleum Oil Lubricants (POL)), coal and containers. These three commodities represent 74-75% of total cargo throughput handled by ports. Over the past three years ended FY24, POL witnessed a moderate CAGR of 4% while coal and container volumes witnessed healthy CAGR of 13% and 9%, respectively.