2 Indian Ports Key Sector Trends Jan2010

Indian Ports Key Sector Trends21st January 2010

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This presentationTrends: major and minor ports, commodities driving growth, view on capacitiesOutlook: things are looking upConstraints: old; more pressing; and some emerging caution points

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Traffic Snapshot (2008-09)Port Traffic grew at 10% between 2004-05 and 2008-09Traffic at minor ports grew at ~14.2%, ~8.5% for major portsCommodities: dominant share of POL, followed by IO, containers and CoalGrowth in Major port traffic since 2004-05 driven by Containers (CAGR 14.6%), POL (CAGR 8.6%)Traffic growth for Major ports for Apr-Dec 09 vs. Apr-Dec 08: 5.4%Capacity utilization levels peaking for major ports: ~95%Minor ports utilization at 68%Traffic growthComposition for 2008-09POLOthersCont.CoalIron Ore

Chart2

383136

463171

530231

Traffic at Major Ports

Traffic at Minor Ports

Sheet1

POLContainerIron OreCoalOther Cargo

2006-0715473806095

2007-08168929164101

2008-0917593947196

2009-10173989272113

Growth Rate


2007-089%26%14%7%6%

2008-094%1%3%11%-5%

2009-10-1%5%-2%1%18%

Sheet1

15473806095

168929164101

17593947196

173989272113

POL

Container

Iron Ore

Coal

Other Cargo

Sheet2

2002-032003-042004-052005-062006-072007-082008-09

Traffic at Major Ports313344383423463519530

Traffic at Minor Ports108118136145171196231

Growth rate Major Ports

Sheet2

313108

344118

383136

423145

463171

519196

530231

Traffic at Major Ports

Traffic at Minor Ports

Sheet3

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Recent developments select projectsDhamra: IO & Coal, 2009Gangavaram: Coal +, 2008Krishnapatnam: Coal, IO, 2008Karaikal: Coal +, 2008Select recent projects and expected dominant commodities Recent capacities added to minor portsDominated by bulk capacities on the east coast

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Select upcoming projectsParadip: Award of IO and coal terminals Large capacity expansions underway: projected addition ~ 700 MTExpected both for major and minor ports (18 and 20 planned projects resp.)Key drivers: Coal imports for power gen, container demandLNG capacities expected in western ports on the back of improved gas grid Confidence wrt. projects coming upProjects at major ports are at advanced stages of developmentMany minor ports projects at existing ports and capable developersValarpadam: Cont. - dev. by DP WorldMgoa: Coal & IOMum: Offshore cont. (Gammon +)JNPT: 4th cont. term.Mundra: Coal; SPMDahej: LNG jettyEnnore: Coal terminalKrishnapatnam: Phase 2 expDighi: Coal & cont.Chennai: 2nd cont. terminal (PSA Sical)CONTAINERSBULK

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Outlook: Project flow expected to look upInvestments have been already happening on minor portsStrong minor ports capacities in Gujarat; AP and Orissa are catching upProjects flow for major ports has been subdued for various administrative reasonsDelay in finalization of new MCATime taken for clearing tariffs for new projects as per 2008 TAMP guidelinesBut projects flow is looking upRecent awards at Paradip, JNPT 4 under biddingThe PPPAC approved 8 projects during Oct 08 Nov 09 with expected project costs of INR ~ 11 thousand crores4 projects for INR 4,179 crores under consideration

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Outlook: Ports to continue to witness strong growthFrom 2008-09 to 2013-14 CRISIL expects traffic to grow at CAGR of 8.9% to 1167 million tonnesMajor ports expected to grow at CAGR of 4.9% while minor ports at 16.3%Traffic growth likely to be driven by coal (CAGR:14%), followed by containersCurrent and expected commodity shares

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Minor ports: growth in share to continueConsistent growth in market share: Traffic share grew from around 25% in 2005-06 to ~ 31% for 2008-09Majority of recent capacities in minor portsRise in expected share beats past forecastsExpected share in Capacity at 36% as per 11th PlanMajor PortsMinor PortsShare in traffic expected to grow to 42.2% for 2013-14

Chart6

1001.8

573.5

Sheet1

(Million Tonnes)

Traffic2008-092013-14

Major ports503687

Minor Ports224437

7271124

Minor ports share30.8%38.9%

XI Plan

Present Capacity (as on 31/3/07)Capacity by March 2012

Major Ports508.60493.201,001.80

Minor Ports228.31345.19573.50

Total5094931,002

Sheet1

PPPAF

Sheet3

PPP Approval Committee

Projects Under Considerationroposals Granted ApprovalDept of Shipping

S.Name of the projectSectorStateProject costRemarksS.Name of the projectSectorStateProject costRemarks

No.(Sponsoring Authority)in Rs. CroreNo.(Sponsoring Authority)in Rs. Crore

1Development of Container Terminal at New Mangalore Port on BOT basisPorts (Ministry of Shipping)Karnataka275.821Setting up of Iron ore handling facilities on BOT basis at New Mangalore PortPort (Department of Shipping)Karnataka119.66Proposal approved on 29.08.2006.

-59.39-25.77

2Development of Multipurpose Berth to handle clean cargo including containers on BOT basis at Paradip PortPorts (Ministry of Shipping)Orissa445.512Development of 13th to 16th Multipurpose Cargo (other than Liquid/Container) Berths at Kandla Port basisPort (Department of Shipping)Gujarat440Proposal approved on 8.11.06

-95.93-94.75

3Development of North Cargo Berth II for handling bulk cargo at Tuticorin Port on DBFOT basisPorts (Ministry of Shipping)Tamil Nadu332.161Construction of Deep draught iron ore berth on BOT basis by Paradip Port TrustPort (Department of Shipping)Orissa591.35Proposal approved on 23.10.2008

-71.52-127.34

4Development of Mega Container at Chennai PortPorts (Ministry of Shipping)Tamil Nadu31252Construction of Deep draught coal berth on BOT basis by Paradip Port TrustPort (Department of Shipping)Orissa497.01Proposal approved on 23.10.2008

-672.91-103.15

Sub-Total4178.493Development of Eighth Berth as Container Terminal on Build Operate & Transfer (BOT) basis at Tuticorin PortPort (Department of Shipping)Tamil Nadu312.23Proposal approved on 13.01.2009

-899.76-67.23

4Construction of Container Terminal at Ennore Port in Tamil Nadu on BOT basisPort (Department of Shipping)Tamil Nadu1407Proposal approved on 13.01.2009

Last Updated on21 October 2009-302.97

5Development of a Coal Terminal at Port of Mormugao, Goa on Design, Build, Finance, Operate and Transfer (DBFOT) BasisPort (Department of Shipping)Goa334Proposal approved on 13.01.2009.

-71.92

Sub-Total3683.253141.59

-793.12

Proposals Granted ApprovalMin of Shipping

S.Name of the projectSectorStateProject costRemarks

No.(Sponsoring Authority)in Rs. Crore

1Development of Standalone container handling facility with a quay length of 300m towards North at Jahawar Lal Nehru Port TrustPorts (Ministry of Shipping)Maharashtra600.08Proposal approved on 11.11.2009

-129.22

2Mechanism of Coal Handling facilities and upgradation of General Cargo Berth at Outer Harbour of Visakhapatnam Port to cater 200,000 DWT vessels on DBFOT basisPorts (Ministry of Shipping)Andhra Pradesh438.36Proposal approved on 11.11.2009

-94.39

3Development of Fourth Container Terminal at Jawahar Lal Nehru Port TrustPorts (Ministry of Shipping)Maharashtra6700Proposal approved on 11.11.2009

-1,442.72

Sub-Total7738.44

-1,666.33

Chart8

503224

687437

Major ports

Minor Ports

Sheet1

(Million Tonnes)

Traffic2008-092013-14

Major ports503687

Minor Ports224437

7271124


XI Plan

Present Capacity (as on 31/3/07)Expected Additional Capacity during 11th FYPCapacity by March 2012

Major Ports508.60493.201,001.80

Minor Ports228.31345.19573.50

Total5094931,002

Sheet1

0

0

PPPAF

0

0

Sheet3

00

00

Major ports

Minor Ports


Projects Under Considerationroposals Granted ApprovalDept of Shipping



(in US$, Million*)(in US$, Million*)


-59.39-25.77


-95.93-94.75

3Development of North Cargo Berth II for handling bulk cargo at Tuticorin Port on DBFOT basisPorts (Ministry of Shipping)Tamil Nadu332.161Construction of Deep draught iron ore berth on BOT basis by Paradip Port TrustPort (Department of Shipping)Orissa591.35Proposal approved on 23.10.2008

-71.52-127.34

4Development of Mega Container at Chennai PortPorts (Ministry of Shipping)Tamil Nadu31252Construction of Deep draught coal berth on BOT basis by Paradip Port TrustPort (Department of Shipping)Orissa497.01Proposal approved on 23.10.2008

-672.91-103.15


-899.76-67.23

*Currency Exchange Rs. 46.44 = 1$.4Construction of Container Terminal at Ennore Port in Tamil Nadu on BOT basisPort (Department of Shipping)Tamil Nadu1407Proposal approved on 13.01.2009



-71.92

Sub-Total3683.253141.59

-793.12

*Currency Exchange Rs. 46.44 = 1$.




(in US$, Million*)


-129.22


-94.39


-1,442.72

Sub-Total7738.44

-1,666.33

*Currency Exchange Rs. 46.44 = 1$.

Last Updated on21 October 2009

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Capacity utilizations to easeOverall utilization levels would come down from the present ~85% to ~73%Current and expected capacity utilizations

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IssuesMany old constraints remainDraft constraints at major ports, below par efficiency levels, poor hinterland connectivity, delays in environmental clearanceBringing bankable projects to market still the biggest hurdleReliance on private investment for capacity ports dev. is huge: ~USD 14 BnPoor project preparation, unattractive packaging lead to delays at procurement and post award stagesSome minor port projects have highlighted systematic gaps in site selection: environmental issues, unfavorable soil conditions etc.Administrative, policy change issues

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Concerns / Caution points (Observations from recent projects)Qualification criteria for bidding in major ports favoring a few large playersSelection of only top 5 technical bids may lead to adequately qualified firms being out of competition - same firms being selected for different projectsLarge intl. players that bring qualification points are not necessarily investorsThe top 5 selection criteria has been done away with for the roads sectorDifferential royalty structure in minor ports adversely impacts the economics of new port developmentsOperational ports already have a first mover advantageMay delay investments / reduce competitive position of newer developmentsFast paced reform of domestic coal mining may multiply the coal production in IndiaThermal coal is the backbone of investment thesis for bulk portsDomestic coal may simply replace the imported coal for power generation

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SummaryTraffic flow has started to look up after a brief depressionGrowth will be lead by coal and containersTrends from traffic and capacity addition expectationsTrend towards minor ports gaining market share will continueCapacity utilisations shall ease, balance in favour of minor portsInvestments and traffic flows for the eastern cost to be driven by bulk (esp. coal); mixed for western coastSector is poised for growth and investmentsMany minor ports are sitting on potential for capacity ramp up and have robust development plans, major ports projects flow will go upHinterland connectivity constraints and other issues however will need to be managed

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CRISIL Risk and Infrastructure Solutions LimitedA Subsidiary of CRISIL Limited, a Standard & Poors companywww.crisil.com

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Opportunities exist for Brownfield expansions at Major Ports and Greenfield Minor Port VenturesThe 11th Five year plan aims to more than double the existing port capacity to 1575 MTPAMajor Opportunities exist inBOT expansions at Major Ports (ROCE in the range of 14%-16%)JNPT-IV Container TerminalHigh Degree of Certainty on Port Traffic: serves industrial western region and landlocked North IndiaPresence of entire logistics chainEnnore & Chennai Container TerminalsShall play a leading role in Intra-Asia tradeEnnore preferable to Chennai as Chennai has land constraints and may face congestion issuesTuticorin Container TerminalShall serve the Central Tamilnadu Industrial ClusterPresently facing some tariff fixation issuesGreenfield Private Service Ports (ROCE in the range of 14%-20%)A large number of Concessions have been awarded on East as well as West CoastHowever, locational studies would yield 3-4 strategically located ports, alternatively secondary acquisitions can be looked at. ICDs/ CFSRelatively smaller investment and serve as a traffic aggregator for owned ports

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Short term GDP forecasts looking up

Chart2

6.15.47

5.745

6.254.55

5.955.45

5.955.46

6.75.46

CRISIL

IMF

ADB

Sheet1

(Million Tonnes)

Traffic2008-092013-14

Major ports503674

Minor Ports224493

7271167


XI Plan

Present Capacity (as on 31/3/07)Capacity by March 2012

Major Ports508.60493.201,001.80

Minor Ports228.31345.19573.50

Total5094931,002

CONTAINERS101.78175.050.1145509688

2002-032003-042004-052005-062006-072007-082008-094yrShare

Traffic at Major Ports3133443834234635195308.46%69.65%

Traffic at Minor Ports10811813614517119623114.16%30.35%

Total46251956863471576110.04%

Share of minor25.5%26.2%25.5%27%27%30%

Major ports traffic


2002-0310943504860

2003-0412251584863

2004-0512654765273

2005-0614261795881

2006-0715473806095

2007-08168929164105

2008-0917593947196

8.6%14.6%5.5%8.1%7.1%

Sheet1

PPPAF

GDP Forecasts

Major ports

Minor Ports


Projects Under ConsiderationProposals Granted ApprovalDept of Shipping




-59.39-25.77


-95.93-94.75

3Development of North Cargo Berth II for handling bulk cargo at Tuticorin Port on DBFOT basisPorts (Ministry of Shipping)Tamil Nadu332.161Construction of Deep draught iron ore berth on BOT basis by Paradip Port TrustPort (Department of Shipping)Orissa591.35Proposal approved on 23.10.2008Iron Ore

-71.52-127.34

4Development of Mega Container at Chennai PortPorts (Ministry of Shipping)Tamil Nadu31252Construction of Deep draught coal berth on BOT basis by Paradip Port TrustPort (Department of Shipping)Orissa497.01Proposal approved on 23.10.2008Coal

-672.91-103.15


-899.76-67.23

4Construction of Container Terminal at Ennore Port in Tamil Nadu on BOT basisPort (Department of Shipping)Tamil Nadu1407Proposal approved on 13.01.2009



-71.92

Sub-Total3683.253141.59

-793.12





-129.22


-94.39


-1,442.72

Sub-Total7738.44

-1,666.33

CRISILIMFADB

1Mar-096.15.47

2Apr-095.745

5Jul-096.254.55

6Aug-095.955.45

9Nov-095.955.46

10Dec-096.75.46

CRISIL

IMF

ADB

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PPPAC - Proposals Granted Approval

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PPPAC - Proposals Under Consideration

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Distribution of traffic Major PortsSource: CRISIL Research

2 Indian Ports Key Sector Trends Jan2010

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