Three ports on Icra ratings watch after K?taka bans iron ore export

Icra on Monday placed the ratings of three port companies ? Mormugao Port Trust, Krishnaptnam Port and Sical Iron Ore Terminals ? on rating watch with negative implications following the recent ban on the export of iron ore by the Karnataka government.

The action follows recent state government orders imposing ban on the export of iron ore from the 10 ports within the state jurisdiction and restricting issue of permits for movement of iron ore for exports. These directives would limit iron ore exports from the state till the order remains in effect.

While the Karnataka government is reportedly in the process of introducing a new scheme of procedure for granting permits in order to stop illegal mining of iron ore and its transportation, the time period for which these restrictions would be in force is uncertain.

?In view of these developments, the ports/ terminals handling iron ore export cargo originating from Karnataka are likely to witness a substantial shrinkage in cargo volume, as the alternate cargo may not be sufficient to fill the vacuum created because of loss of iron ore cargo,? a media release from Icrasaid.

?Further, at some ports the facilities are specifically designed for handling bulk/iron ore cargo. Thus, the cargo volumes and the cash flows may be negatively impacted. Icra will monitor the developments in this regard and evaluate their impact on the cargo and financial profile of the concerned ports before finalising its rating action on the respective companies,? it added.

Mormugao Port Trust (MPT) handled 34 mtpa of iron ore cargo constituting nearly 80% of total cargo traffic in 2009 fiscal. A large part of the iron ore mined at Bellary-Hospet region in Karnataka is exported through MPT and because of the recent government restriction the same may not be available for export; thus, impacting the overall tonnage at MPT.

?It is difficult to quantify the exact quantum of iron ore cargo from Karnataka that is exported through MPT because part of ore is blended with Goan ore to improve the ferrous content apart from the iron ore received directly from BH region to MPT which is in the range of 5-6 mtpa,? Icra said.