Commodity price inflation, and not volumes, drives EXIM trade’s sharp growth: Nomura

In handling the port volumes, the Railways seems to have gained in market share over roadways. (Photo by Pixabay/ Pexels)

Core EXIM trade rose nearly by a third this April versus April 2021, but this was largely driven by commodity price inflation rather than underlying volume growth, said Nomura in its India Logistics Monthly Report.

Year-on-year, EXIM trade’s growth was led by nearly 37% increase in imports, and about 18% increase in exports. Month-on-month, core imports declined by 4.5% and exports declined by 7.3%. 

Year-on-year, aggregate volume growth of major ports was just around 6%, despite a weak base. In April 2021, the country had seen the onset of the second Covid wave.

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“Core EXIM trade rose 27.3% y-y vs Apr 2021 (down ~6% m-m). This was led by a sharp 36.6% y-y growth in core imports (-4.5% m-m), while core exports rose at 18.3% y-y (-7.3% m-m) over Apr-21. However, we note that a large part of this was driven by commodity price inflation rather than underlying volume growth,” said the report. 

The graph (below) plots the growth in EXIM trade against volume handled at major ports and key private ports. “The sharp divergence between value of EXIM trade and port volumes indicates the impact of a sharp surge in commodity prices,” said the report.

Volumes at major ports were driven by POL (petroleum, oil, lubricants) and coal volumes. The report said, “POL (petroleum, oil and lubricants) and coal volumes came in strong, rising 14.7% y-y and 6.3% y-y, respectively, while iron ore volumes were weak, declining 17.5% y-y. Fertilizers volumes (+13.8% y-y) remained strong during Apr-22.”

“Container volumes came in weak at 943k TEUs, were stable y-y (-3.1% m-m). In tonnage terms, container volumes remained flat y-y,” it added.

In handling the port volumes, the Railways seems to have gained in market share over roadways. This inference was drawn from the fact that the Railway EXIM container volumes rose 7.2% in April 2022 even when port container volumes remained flat y-o-y.