Sea and road logistics recovering; air still under pressure: Ind-Ra

September 26, 2020: India Ratings and Research (Ind-Ra) has published the August edition of its credit news digest on India’s logistics sector noting that sea logistics (global and domestic) and surface logistics (rail and road) are recovering while air logistics (passenger and freight) still remains under pressure.

The sea and road transportation segment witnessed a continued recovery on a month on month (mom) basis in August 2020, though it remains lower year on year (YoY). In August 2020, India’s ports volumes continued the recovery trend displayed in June-July, by improving to 85-90 percent of the pre-Covid levels. In August 2020, E-way bill collections rose 2 percent mom (though down 14 percent vs February 2020; down 3 percent YoY); while railway volumes were up 4 percent YoY, they were down 13 percent on a YTD basis. With airline carriers re-starting operations from June 2020, air transport activity too is normalising with plant load factor at around 65 percent for flights, though substantial fleet remains grounded and passenger numbers in July were significantly below normal levels.  

Sea Transport 
The overall major port volumes witnessed a monthly improvement in August 2020, though the volume trade remains lower YoY. The overall major port volumes recovered in August 2020, reporting a decline of 10 percent YoY, (July: down 13 percent YoY; June: down 15 percent YoY). During April-August 2020, the overall volumes fell 17 percent. The recovery in the monthly volumes has been led by a 38 percent and 29 percent increase in the imports of iron ore and fertilisers, respectively. Dwell time for import containers at JNPT Port witnessed a monthly improvement to 22 hours in July 2020 (June: 38 hours; May: 65 hours) with the gradual resumption of business activities. The port dwell time for export containers increased marginally to 75 hours in July 2020 (June: 69 hours; May: 60 hours).

Surface Transport 
Road transportation has witnessed traction with a gradual increase in the availability of trucks and an increase in the supply of labourers, leading to a decline in railway market share, which had increased in April 2020. The market share of the road stood at 80 percent during August 2020. E-way bill collection at 49 million in August 2020, is gradually returning to normalcy. It stood at 86 percent of the pre-COVID levels (February 2020) and remains 3 percent YoY lower. Diesel consumption too has witnessed an increase with a gradual pick-up in the business activities post lockdown. However, diesel consumption witnessed a mom decline of 15 percent and 12 percent during July and August 2020, compared to the mom decline of 11 percent in July and August 2019. While average freight rates have witnessed a negligible increase, the impact of higher diesel prices is likely to weigh on profitability. Diesel prices though have declined by about 10 percent mom in August 2020.

Air Transport
With India GDP forecasts being revised further downwards, the recovery in corporate travel could be slower than Ind-Ra’s initial expectations and could remain under pressure even in 1HFY22.  Passenger traffic nearly remained nil in April-June 2020 due to the nation-wide lockdown and travel restrictions. Few domestic carriers started operations in May-June 2020. However, the current passenger load factor at 59 percent-76 percent may not be truly representative of the actual recovery, as a large number of aircraft are still grounded. Freight traffic in July 2020 stood at around 65 percent of normal air freight volumes, impacted by overall weakness in economic activity, lack of manpower, and significant erosion in overall available belly-load freight capacity with many passenger aircraft grounded.