The OpenSea team have seen a lot of inquiries to load or discharge in Indian ports and for this reason, we decided to look into the economy of this country, its activity in the dry bulk and tanker industry as well as the recent developments which might affect the freight markets accordingly.
India plays an important role in the shipping industry not only because its economy is the sixth largest in the world in terms of Gross Domestic Product (about 2.4 trillion estimated for 2017) and the third largest economy in terms of Purchasing Power (about 9.5 trillion estimated for 2017) but mainly because it is also one of the most emerging economies nowadays, being highly active in the imports and exports of raw materials. The composition of cargo handled by Indian ports was estimated to be about 37 % oil and petroleum products, about 23.5% coal, about 19.5% containers, 5.5% was iron ore, fertilisers were accounted for about 2.5% while 12% were various other minor bulk products.
The fastest growing economy in the world
Since 2015, India’s growth has exceeded the growth of China and has now become the fastest growing economy of the world. Furthermore, the prospects show that India will maintain its position for the next 5 years. The below diagram with the projections of IMF until 2021 show that the growth of the Indian economy will exceed the 8% after 2021.
Source: IMF, 2017
The crude steel production is another economic indicator which shows the industrial activity of a country and which is very important for the dry bulk shipping. Iron ore is the main ingredient necessary to manufacture steel and India both imports and exports same. According to Clarksons, India imported about 4 million tons iron ore and exported about 16 million tons during 2016. India’s steel production has been doubled during the last 10 years and during the same time, the imports for iron ore were increased for almost 40 times; from 0.1 million tons in 2008 to about 4 million tons in 2016. Since India is one of the few countries whose industrial production is growing by more than 4% per year, its needs for iron ore may be increased during the next years unless its domestic production is also increased. The following diagram shows the growth of crude steel production of India along with the country’s imports during the same period.
Source: Clarksons (Data analysis)
The new leader in coal imports
Coal is the dry bulk commodity with the second largest trading volume in the world and India has been one of the three major leading importers; along with China and Japan. During 2016 India imported about 156.2 million tons thermal coal and about 46.9 million tons of coking coal which accounted for about 18% of the world coal imports. The below table describes the development of Indian imports since 2010 and their correlation with the Chinese and Japanese imports as well as the total world imports. Indian coal imports have been increasing during the last years and since 2015 it has taken the pole position. After a 23% y-y growth in 2013-2014 and in the middle of a negative dry bulk market, there was the hope that India might fill the void left by China’s shrinking imports. Though, the increased domestic coal production during 2015 and 2016 has kept its imports steady or slightly decreasing and the hopes for a further growth seemed to be premature. However, India still maintains her leading position in the coal market and the early forecasts for 2017 show that the situation will remain unchanged.
Coal is mainly imported from Indonesia or South Africa usually in Supramax and Panamax shipments while in a lesser extend Capesize shipments of USA coal are imported into the country. Ports of both in East Coast and West Coast are utilized for discharge operations.
The largest exporter of rice worldwide
Recently India has beaten Thailand as the largest exporter of rice in the world. During 2015 India exported 10.23 million tons of rice as compared to Thailand's 9.8 million tons. According to 2016 data, India exported about the 29% of the world rice in terms of value (in US$). China and West African countries are major buyers of the Indian rice which is exported either in bags or bulk and loaded mainly in handysize or up to supramax bulk carriers. Kakinada in East Coast India is a major port for exporting rice. Latest reports show that its exports of rice are expected to drop to about 10 million during 2017 due to increased competition and drop in demand. This drop is not expected to affect the leading position of India in the industry.
Increasing Oil trade
India is now importing about 4.3 million tons crude oil which is equivalent to the 11% of world imports. In fact, India is now the third largest importer of crude oil behind China and USA. However, its imports have been increased by almost 16% since 2012 and it is expected to further increase within 2017. Further to a continuous drop of USA imports, India is expected by the end of this year to take the second position in the importing countries worldwide, behind China. The below table shows the crude oil imports of India in comparison with the imports of China, USA and the world imports.
Imports of Crude Oil (in Million Tons)
Except of the increasing imports of crude oil, the export of refined products remains steady at about 6% of the global exports, at around 1.5 million tons per year.
Is the infrastructure sufficient?
Despite the fact that India is the 16th largest maritime nation in the world with a coastline of more than 7,500 km and with more than 200 ports in total, its weakness, especially in the dry bulk shipping, stands on the port’s infrastructure since only 12 out of these ports are major. Not only most of the ports are small or medium sized and they restrict the large vessels from entering but they also lack certain equipment and/or have a slow operating turnaround. As a result, most of the ports can only accommodate small and geared vessels, some ports may require lightering operations, while subsequently the congestion is getting high. The situation is becoming worse during the monsoon period when the working hours become fewer due to the weather conditions and sometimes waiting time for vessels may exceed 15 days.
In an effort to revitalize the transportation segment of India, the Indian Ministry of Shipping, Road Transport and Highways, announced a massive investment in the country’s ports and roads sector. These investments, which also include the creation of manufacturing hubs near to the ports, are expected to help expand the country’s International trades and boost its economy.
So, will India become the next hero of shipping?
Despite the positive signs of the country’s growth, it seems that India cannot yet take the role of China in bulk shipping due to the following reasons:
— The country’s steel production experiences a high growth however its total steel production volume is almost 10% of the steel production of China. Therefore, the country is expected to be highly self-sustained in her iron ore needs and its share in the global iron ore exports and imports will remain low.
— Its coal imports will remain at high levels however it does not seem that the country will experience a further growth at least for the next couple of years. Also, its geographic position (very close to Indonesia and South Africa) keeps the ton-mile demand at low levels despite the high volume of coal which is imported each year.
— India has come up with plans to end fertilizer imports within the next 3-4 years. Since about 2.5% of all the commodities that the country is currently handling is fertilisers, the expected drop of the rice exports along with the decrease of fertilisers imports may negatively affect its trade activity by almost 3% in total.
— The port infrastructure is still very underdeveloped and the country cannot manage a big growth of its trading volume under the current circumstances. Of course, the government is now taking measures for expansion of its maritime facilities, however they are not expected to change the scene within the next couple of years.
Therefore, in the short term, India will keep playing a major role in bulk shipping however it is not expected a drastic change in its current role and the hopes that this is the new dragon who will give the boost in bulk shipping are considered pre-mature. Though, in case its economic growth continues at levels of higher than 8% and its ports and other infrastructure are modernized, its economic profile will materially change and its long-term prospects for being the new king of shipping cannot be excluded.
During the last few months, ship chartering professionals from India have shown more interest in our platform and India has now been one of our most active regions. So, if you are interested in being informed of more cargo offers and ships opening in this area, just register in our marketplace and upload your open positions.