The port sector is witnessing early signs of recovery and the rate of cargo decline at major and non-major ports decelerated in July, rating agency ICRA said on Tuesday. The Indian port sector witnessed sharp contraction during the first quarter of 2021 due to the impact of COVID-19 pandemic and containment measures adopted by the government, it said.
"While the major ports witnessed 20 percent decline in the first quarter of 2021, the non major ports declined 24 percent during the same period. However, in the month of July 2020, the rate of cargo decline decelerated with major ports witnessing year-on-year decline of 13 percent and non major ports witnessing sharper improvement with decline of just 4 percent," ICRA said in a statement.
As per the ratings agency, the 2021 outlook for the port sector remains negative and although there are early signs of recovery as witnessed by trends in July, the sustainability remains to be seen.
Sai Krishna, Assistant Vice President and Associate-Head, ICRA added: “The contraction in port cargo was driven by sharp fall in POL and coal volumes, due to decline in domestic demand and economic activity, while container segment was also impacted by subdued exim trade.'
With the easing of containment measures and improved demand for petroleum products and power, the POL and coal segment should witness recovery, he said and added, however, the recovery in segments like containers may be more prolonged due to dependence on both domestic economic activity and global demand trends.
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"ICRA reiterates its expectation that while general cargo throughout may witness 6-8 per cent contraction for full year 2020-21, the container segment may witness a decline of 12-15 per cent during the same period,” he said.
ICRA also notes that while some of the measures announced by the Ministry of Shipping (MOS), in the wake of COVID-19 pandemic to support various stakeholders, should help the liquidity profile of entities like PPP (Public-Private-Partnership) terminals operating at major ports during the period of lockdown, however sustained slowdown in cargo volumes will put pressure on their liquidity profile.
Commenting on the credit outlook, K Ravichandran, Senior VP and Group Head, ICRA Ratings, mentioned: “The credit profile of port sector players, especially the companies which have incurred large debt funded capex or have commenced operations recently, is likely to remain under pressure in the near to medium term."