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India Shipping Report Q3 2010
Business Monitor International, June 2010, Pages: 103
Business Monitor International's India Shipping Report provides industry professionals and strategists, corporate analysts, shipping associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on India's shipping industry.
India's port sector appears to be on track to meet our 6.5% throughput growth target in 2010/11 after figures released by the Indian Ports Association (IPA) showed 3% growth in volumes in April, the first month of the financial year. However, BMI warns that increasing government concerns over inflationary pressures present a downside risk to our forecasts. Total tonnage throughput at India's 12 major ports was estimated at 46.6mn tonnes in April compared with 45.4mn in April 2009. The figures showed significant volume growth at the ports of Kandla, JNPT, Chennai, Mormugao and Mumbai.
BMI believes a robust recovery in India's industrial sector is one of the main factors driving port sector growth. After slowing to just 7.7% in 2009 in the wake of the global economic downturn, we forecast India's production index to average 13.5% growth this year, led primarily by a strong construction and infrastructure sector. India's steel output grew by 11% year-on-year (y-o-y) in Q110, driving up imports of iron ore and other commodities. Strong consumer spending is also major driver, with a projected GDP per capita increase expected to lead to a 20.7% rise in imports of manufactured goods in 2010.
The Indian economy is looking very supportive for the activities of the freight transport sector. A strong recovery is in progress, with GDP growth this fiscal year forecast by BMI at 7.8%. Over the next 10 years we expect annual economic growth in the 7-8% range, making India one of the top-performing emerging markets. Foreign trade this year will grow a stronger 12.5%, and remain in double digits in the future. All this adds up to strong freight demand, particularly for bulk commodities such as oil, coal, iron ore, steel and a range of agricultural foodstuffs.
Across India's major ports we see double-digit annual growth in both total tonnage and containers handled. At the Port of Jawaharlal Nehru (POJN), total tonnage handled will surge ahead this year, rising by 15.6% to 69.36mn tonnes, a dramatic increase in pace after the 4.7% growth experienced in recessionhit 2009. At the Port of Chennai (POC), another member of the country's group of top-12 maritime facilities, we are expecting growth of 10.7% this year to 67.81mn tonnes, after 6.5% expansion in 2009.
India will experience a dramatic trade performance. In real terms foreign trade slumped by 7.9% last year, but we see it growing strongly in 2010, up by 12.5%. Over the next five years we are projecting that total trade will expand by an average of 12.5% per annum in real terms, significantly ahead of average GDP growth of 8%. In nominal terms this year we seem imports leading the way with growth of 32.4% to US$439.3bn, while exports will grow by 31.3% to US$344.5bn. India is running a significant balance of trade deficit, and is likely to continue doing so over the next five years.
With such a strong freight transport forecast, it is perhaps not surprising that we see a range of risks pointing to the downside. In our view there are lots of medium-scale risks, rather than one or two very large ones: in other words they are perhaps manageable if the government takes a proactive role. The risks include inflation, security, trade protectionism, infrastructure shortcomings, a potential 'double-dip' slowdown in the world economy and tighter credit conditions.
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