Port mechanisation to increase revenue by 15%: Essar Ports

Essar Ports has commissioned its 16 million tonne per annum (MTPA) dry bulk terminal at Paradip in Odisha. In an interview to CNBC-TV18 Rajiv Agarwal, CEO and MD, Essar Ports citied his expectations from the project and  the road ahead.

The mechanised Paradip terminal will help in decongesting the port, which will be used for handling iron ore and dry bulk cargo. He expects port mechanisation to increase their revenue by 10-15 percent going forward.

Below is an edited transcript of Rajiv Agarwal’s interview on CNBC-TV18

Q: What does this expansion mean to you?

A: This expansion means an additional 16 million tonnes of capacity. This is for iron ore and other bulk commodities. The port had an existing terminal which has been mechanised, the port has stewards and other people who will do manual operations. Now there is a complete mechanized port terminal which is the state of the art business with ship loader.

Q: Do you mean the Pradip bulk terminal was operational, but has gone mechanized only now or is it an additional 16 tonne that you can handle?

A: There is a lot of the existing berth, CQ3, which was pretty existing and has been mechanized. A long conveyor of port terminal has been late to connect it to the stack yard. This will help in decongesting the port because this additional cargo is going to come in and will not use any space inside. It will not come through trucks or even rail, it will mostly come through this conveyor. It will not cause any extra congestion.

Q: By how much will it increase your revenues if it is operational now? Most of it will generate revenues in the fourth quarter, how much will the revenues go up by?

A: In the fourth quarter as we start, we would do about 1.5 to 2 million tonne of cargo in the first quarter that we will be operational. Annually, it is suppose to do about 16 million. So next year we expect at least 10-12 million tonne of cargo that we will be handling.

Q: Will that be 10-12 percent increase in your revenues?

A: Yes, it will be about 15 percent increase in the revenues.

Q: What is your outlook for iron ore, the prices recently had a decent rally, what is the expectation for 2013? Are you expecting a major pick up, with China rebounding from hereon?

A: Yes. Iron ore is having many other issues in terms of export of iron ore but this is more of the coastal movement from Paradip to Hazira. Also, there will be other cargo’s which could be moved out like coal or cargo which could be coming in at the terminal so this is general purpose terminal. Apart from iron ore we expect other cargos also to be moving. At the moment, if you see the iron ore cargo at Paradip or any other port have really come down because of the ban on exports of iron ore.

_PAGEBREAK_

Q: Have your volumes come down?

A: Yes. It has come down because of the mining issues and other restrictions on exports of iron ore.

Q: How much do your group companies like Essar Steel, Essar Oil, and Essar Power constitute in terms of business?

A: They help us, as 55 to 60 percent of the cargo is expected to be from our own in-house which is guaranteed. Balance is only what we expect from outside, in terms of various other cargos.

Q: Assuming the iron ore ban is taking away a chunk of your business; aren’t imports equally counter veiling this strength? One is expecting coal imports as well, have you seen any of that happening?

A: No. We have not factored in much of iron ore exports because as far as iron ore is concerned, we are concentrating more on iron ore which we will move for Essar Steel. So that terminal dampened our spirits but yes, what you are saying is right and coal will compensate the loss of cargo which ports are having in general for iron ore.

Q: What would you do by the way of margins? Do you operate at fairly high margins?

A: We will start operating and then figure out but it will be as usual. The operating margins would be because it is mechanised terminal, so it would be around 65 to 70 percent.

Q: Are there any more expansions that we may hear any time soon?

A: We are working on two other projects, the Salaya and coal terminal at Paradip. Salaya is expected to be operational by next year and coal terminal will take two years. These are two other projects which we are working on and then we also have an expansion, which will complete sometime next year. So, this will take our capacity, the present expansion will take our capacity to 104 million tonnes. Currently the projects that we are working on will take us completely to 160 million tonnes by 2014-2015.

Q: You’ll operate two capacities? Is the slow down not hit capacity in any serious fashion?

A: Yes, we’ll operate two capacities. No, because we have a mix of guarantee cargo and cargo from outside. By that time we expect about 30 percent of the cargo to come from outside. We do not see a major decline or any major effect. We expect that now there should be some pick up in most of the sectors starting next quarter.