Coal, crude oil spikes lead port freight charges in FY23, government data shows

India’s state-owned ports posted strong growth in the fiscal 11-month period on improved supply of imported coal, increasing coastal shipping of domestic coal and rising crude oil imports.

Data released by the government shows that cargo growth was 9.4 percent in FY23, with a total volume of 711 million tonnes (mt).

This growth has come despite slow international trade for most of this fiscal year as the effects of the Russia-Ukraine war were seen in commodities.

Overseas cargo handled in major ports increased by 10.2 percent to 546.88 tons in April-February 2022-23, from 496.45 tons in April-February 2021-22, according to data from the Ministry of Ports, Shipping and Waterways (MoPSW). .

Large ports refer to those owned by the central government.

Coastal cargo handled in major ports increased 7.1 percent to 164.67 tons in FY2023, from 153.70 tons in April-February 2021-22.

So far this fiscal year, imported and other unclassified coal has seen an 89 percent increase during the fiscal year, while domestic thermal coal volumes have grown 21 percent. Crude oil freight also saw 13 percent growth.

One of the main drivers of coal demand is the country’s power generation sector, which has to brace itself for another record high demand for electricity in the coming summer months.

The center has also ordered states to import thermal coal to fill the shortage. In addition, the non-energy sectors, particularly steel and manufacturing, are experiencing a business boom, which is also driving demand for coking and non-coking coal.

Experts believe that these figures are likely to remain at high levels as more coal will be transported via the Rail-Sea-Rail (RSR) route than rail in the coming months.

Crude oil imports have been rising since sanctions-hit Russia offered its oil at deep discounts. India imported about 51 million barrels of crude oil from Russia in February, up 16 percent from the 44 million barrels imported in January.

Meanwhile, the outlook for international trade remains bleak, which is likely to affect finished goods traffic.

For containers, India recorded a 50 percent year-on-year price fall from $4,237 in March 2022 to $2,127 in March 2023. Despite growth across all segments and additional handling capacity in major ports such as Jawaharlal Nehru Port (JNPT) and Deendayal Ports (DPT), containerized cargo had almost negligible growth in FY23.

The center has made coastal shipping a priority area.

Union Finance Minister Nirmala Sitharaman said in this year’s budget speech that coastal shipping as an energy-efficient and cost-effective mode of transport for both passengers and cargo will be promoted through public-private partnerships (PPPs) with profitability gap funding (VGF).

The center is currently working on a production-based incentive system for containers to protect transport companies from price fluctuations.

“The drop in demand for freight or container trade comes as there has been no significant destocking in the US and EU, with uncertainty around restocking and consumer spending exacerbating the situation. This signals a bleak outlook for container prices to pick up again in the near future,” read a forecast by Germany-based logistics platform Container Xchange early last week.

“The excess of containers and falling demand bode badly for the global economy as they indicate a slowdown in buying and selling by people and businesses,” she added.

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