SHIPPING & LOGISTICS SECTOR

• Shipping
• Air-freight
• Surface Transportation (Road & Rail)
• Ports, and Port Services
• Shipyards
• Warehousing, CFS, ICDs
• Freight Forwarding, CHA/Custom Brokerage
• Third Party (3 PL) Logistics
• Maritime/Offshore/Onshore Services

Sector Overview: Indian logistics sector employs over 45 million people. Years of high growth in the Indian economy have resulted in a significant rise in the freight traffic helping most segments of logistics sector. Enormous future potential exists for the Indian Logistics sector with the expected growth in international trade, domestic Indian consumer market, and online retail. India is set to emerge as a major logistics hub; and the Indian logistics market is estimated to grow from ~ US$110 Bn to ~US$ 200 Bn by 2020 (CAGR of 10.5%), creating large-scale employment opportunities.

Shipping: The prospects of Shipping Industry mirror the global economic activity. Shipping freight rates have been week in recent years due to weak global economic scenario, subdued economic growth in OECD countries, low scrapping rate and new fleet supplies. With the global economic growth turning up, the global shipping industry should improve. Indian Shipping could do better due to recent increase in domestic refining capacity and anticipated higher crude imports.

Ports: India’s ports are gateways to its international sea trade, handling 90% volume and 70% value of its foreign trade. India ranks 16th among the maritime countries, with 7,500 kms long coastline, and 73 operational ports. The sector may see a boom in coming years with the economic growth and higher commodities movement; and Exim cargo traffic at Indian ports may nearly treble from 912 MMT to 2,800 MMT during 2012-20. The GOI plans to double the ports capacity from 1,245 MTPA to 2,493 MTPA during 2012-17 by investing US$ 30 Bn.

Air Cargo Transportation:  The air cargo traffic represents ~1% of total trade volume, but ~30% of trade value. The air-cargo traffic grew at 11.5% CAGR during 2006-12; and could grow further at a CAGR of 10.3% to ~6 MMT by 2020, with the growth in Exim volumes of pharmaceuticals and electronics, increased trade between India and  Asia-Pacific region, growth of the end-consumer sector and demand for time-bound service within Indian market.

Rail Freight: India’s rail network spanning 64,456 km is the largest in Asia and the 2^nd largest in the world; and is among the fastest, most economical and environment-friendly modes of transport for freight over medium and long hauls. Though, rail freight has been growing (7% p.a. rise during 2008-13 to 1 Bn ton), its share in the total freight has fallen to ~30% in 2013 (from ~90% in 1951).  India’s rail infrastructure is under-developed. India urgently needs rail-freight reforms with large investment in rail-freight infrastructure along-with the connectivity with ports and road networks.

Road Transport: Roads is the most significant part of India’s logistics industry with its ability for the first and last-mile connectivity. Due to limited rail infrastructure, the road transport handles 60% of the total freight movement within the country. Indian road freight could grow from ~1,250 BTKMs to 1,700 BTKMs during 2012–17 (9.6% CAGR). However, slow pace of road infrastructure development and poor quality of roads network are major bottlenecks.

As the government has planned massive investments in development of multi-modal transport infrastructure including DFCs, the Indian logistics sector offers bright future prospects for the business growth and employment.

KLS&A Advantage: The specialised domain knowledge and the quality of management are essential to succeed in the logistics sector. Our team has significant experience and expertise in hiring top and senior level logistics talent. We have been assisting in identifying, evaluating, and hiring high quality professionals to our reputed clients, who are large Indian groups and global MNCs in shipping & logistics. Our founder has served on the Boards of Ports/Logistics companies; and has good understanding of the logistics businesses and contacts in this sector, which come handy in closing senior level mandates. We are well positioned to partner and help you in your quest for hiring suitable talent in this sector.

 (References: Various media reports, press clippings, articles & research reports, including from IBEF, EM, Deloitte-ICC, KPMG-CII, etc.)

[Disclaimer: This general note has very broad and indicative information of the industry sector(s); has been compiled through secondary research from various known and unknown sources; and hence, the information herein may not be complete, latest or accurate; and this is not meant to be relied by anyone for any purpose; and KLS&A or the sources are not in any way responsible for any errors or shortcomings in the same. You should consult your own experts and do your own independent homework & research before acting in any way.]

SHIPPING & LOGISTICS SECTOR IN INDIA

Sector Overview: Indian logistics sector employs over 45 million people. Years of high growth in the Indian economy have resulted in a significant rise in the freight traffic helping most segments of logistics sector. Enormous future potential exists for the Indian Logistics sector with the expected growth in international trade, domestic Indian consumer market, and online retail. India is set to emerge as a major logistics hub; and the Indian logistics market is estimated to grow from ~ US$110 Bn to ~US$ 200 Bn by 2020 (CAGR of ~10.5%), creating large-scale employment opportunities for different segments.

Shipping: Shipping being a global Industry, its prospects reflect the global economic activity; and it comprises different kinds of carriers depending on the type of the cargo. The shipping industry is investment intensive and cyclical; and its fortunes are influenced by factors like global trade growth, geographical balance of trade, level of old vessels scrapping and new ship-building orders. Shipping freight rates have remained week during recent years due to weak global economic scenario, subdued economic growth in OECD countries, low scrapping rate along-with new fleet supplies. With the global economic growth turning up, the global shipping industry should improve. Indian Shipping could do better due to recent increase in domestic refining capacity and anticipated higher crude imports.

Ports: India’s ports are gateways to its international sea trade; and handle 90% volume and 70% value of its foreign trade. India ranks 16th among the maritime countries, with 7,500 kilometers (kms) long coastline, 13 major ports, and about 60 non-major operational ports on the western and eastern coasts. The Indian ports sector received FDI of US$1.64 Bn during 2000-14. The sector is poised for a major leap in coming years, with the anticipated economic growth, and substantially higher movement of commodities. During the 12^th five year plan period 2012-17, the export-import (Exim) cargo traffic at Indian ports may nearly double from 912 million metric tons (MMT) to 1,758 MMT; and treble to 2,800 MMT by 2020. So, the government has planned to double the ports capacity from 1,245 million tons per annum (MTPA) to 2,493 MTPA during 2012-17; at an investment of US$ 30 Bn. This would create substantial business growth and employment opportunities.

Air Cargo Transportation:  The air cargo traffic represents ~1% of total trade volume, but ~30% of trade value. Ever since Indian government allowed Open Sky policy in early 1990s, the air-cargo volume at Indian airports has been rising – quadrupling from 0.7 MMT in 1995–96 to 2.7 MMT in 2011–12. The air-cargo traffic grew at 11.5% CAGR during 2006-12; and could grow further at a CAGR of 10.3% to ~6 MMT (international 3.5 MMT and domestic 2.5 MMT) by 2020, with the growth in Exim volumes of pharmaceuticals and electronics, increased trade between India and  Asia-Pacific region, growth of the end-consumer sector and demand for time-bound service within Indian market. The investment planned in development of airports, air-logistics infrastructure, and improvement of operational efficiency would help realise potential of the air cargo logistics, and create jobs.

Rail Freight: India’s rail network spanning 64,456 km is the largest in Asia and the 2^nd largest in the world, that daily operates 19,000 trains, transports 23 million passengers and 2.65 MMT of freight; and is among the fastest, most economical, and environment-friendly modes of transport for freight over medium and long hauls. Though, rail freight has grown at 7% p.a. during 2008-13 to 1 Bn ton, its share in the total freight has fallen to ~30% in 2013 (from ~90% in 1951).  India’s rail infrastructure is under-developed. During 1951 to 2007, while traffic on rail has grown more than tenfold, the rail track length has grown only 1.4 times. As the trunk routes of just 16% of the network, carries 50% of total traffic, it results in high congestion and low average speed of 25 km/hr. for freight trains. India’s 44 km of train track per 1,000 sq. km. of land is lower against 137 km in US and 417 km in Germany. India urgently needs rail-freight reforms with large investment in rail-freight infrastructure along-with the connectivity with ports and road networks.

Road Transport: Roads is the most significant part of India’s logistics industry with its ability for the first and last-mile connectivity. Due to limited rail infrastructure, the road transport handles 60% of the total freight movement within the country. In India, road freight has risen from ~6 billion ton kilometers (BTKMs) in 1950–51 to ~1,250 BTKMs in 2011–12 (9.15% CAGR); and could grow  to  1,700 BTKMs during 2012–17 (9.6% CAGR. However, the pace of road infrastructure development has been slow with a meagre 2% CAGR from ~ 3.7 million km to ~ 4.7 million km during 2001-12. The Indian road density of 2.83 km per 1,000 people is very low compared to the global average of 6.7 km. India’s limited and poor quality of the road network causes the low average trucking speed of 30–40 km per hour (kmph) vs. the global average of 60–80 kmph. Expediting the pace of the roads infrastructure development; promotion of fleet exchanges of transport customers & transport vendors with an online real-time technology platform; electronic toll collection (ETC); encouraging use of larger trucks to avoid overloading and pollution, are a few important suggestions to  transform the road logistics sector. With the government’s ongoing actions on these fronts, Indian road logistics industry has promising future for growth going forward.

In summary, as the government has planned massive investments in development of multi-modal transport infrastructure including DFCs, the Indian logistics sector offers bright future prospects for the business growth and employment.

Human Talent Perspective: The specialised technical domain knowledge and the quality of management are essential to succeed in the logistics sector.

 (References: Various media reports, press clippings, articles, and research reports, including from IBEF, EM, Deloitte-ICC, and KPMG-CII, etc.)

[Disclaimer: This general note which has very broad and indicative information of the industry sector(s), has been compiled through secondary research from various known and unknown sources; and hence, the information herein may not be complete, latest or accurate; and this is not meant to be relied by anyone for any purpose; and KLS&A or the sources are not in any way responsible for any errors or shortcomings in the same. You should consult your own experts and do your own independent homework & research before acting in any way. ]