Traffic on Indian Railways recorded year-on-year (y-o-y) growth of 3.9 per cent in August 2020. After declining for five months in a row, traffic on Indian Railways recorded a y-o-y growth in August 2020. This growth, however, comes over a low base of 6.1 per cent contraction recorded during August 2019. Compared to July 2020, traffic on railways in August was slightly lower.
Owing to the seasonal nature of railways freight, it generally falls below 100 million tonnes during the monsoon months of June to September. Railways traffic during July-August 2019 averaged to 95.4 million tonnes. Similarly, average railways traffic during July-August 2020 was 94.9 million tonnes. Coal is the major commodity transported through the railways. Monsoon based seasonal variations in coal production thus influences overall railways freight traffic.
After recording double-digit contraction since March 2020, overall coal freight traffic fell by 2 per cent in August 2020. Coal freight movement data can provide some insights into industrial activity and trade.
Traffic of both imported coal and domestically produced coal fell by around 30 per cent in April 2020. Imported coal makes up for 15.5 per cent of total coal freight. During August 2020, traffic of domestically produced coal has recovered and recorded 1.8 per cent y-o-y growth. In contrast, traffic of imported coal declined by 18 per cent during the month. As per data released by DGCI&S, imports of coal, coke & briquettes fell by 50 per cent during April-July 2020. A fall in traffic of imported coal during August 2020 indicates that imports of coal (as seen in the trade data) are expected to continue falling and not recover even in August. The decline in coal imports is concentrated in coal other than that used in steel plants.
Coal and iron ore are used in production of steel. Coal transported to steel plants is slowly recovering from its 37.2 per cent fall in April 2020. The fall was restricted to 5.1 per cent in August 2020. Iron ore traffic to steel plants recovered in August and recorded 3.5 per cent growth during the month. The extent of contraction of other raw materials transported through the railways to steel plants narrowed in August. Increased traffic of raw materials for producing steel is in line with higher production of pig iron and finished steel. Traffic of pig iron and finished steel from steel plants recorded over 10 per cent growth in July and August 2020. As per data released by JPC, finished steel production is recovering and it has inched very close to pre-lockdown levels during August 2020.
Movement of coal for thermal power plants on Indian Railways has been inching up slowly in line with an increase in thermal power generation. During July-August 2020, it averaged at 15.7 million tonnes per month compared to 14.7 million tonnes per month during the previous two months. This implies an increase of 6.8 per cent which is in line with the 5.3 per cent increase in thermal power generation by the same comparison.
Coal traffic for other public users recovered from a continuous y-o-y decline since March 2020 and grew by 3.5 per cent in August 2020.
Fertilisers industry was one of the least affected industries during the pandemic induced lockdown. Traffic of fertilisers recorded 14.8 per cent y-o-y growth in July 2020. During August, fertilisers’ traffic rose to 29 per cent. Hence, we expect fertilisers’ production to continue performing well across July and August 2020.
Foodgrain movement over Indian Railways reached an all-time high surpassing its earlier spike in April 2020. The average monthly foodgrain transported over Indian Railways during 2019-20 was 3.1 million tonnes. In comparison, Railways carried a record 6.17 million tonnes in April 2020. In August this record was surpassed to touch 6.24 million tonnes.
Although cement & clinker traffic has recovered to pre-lockdown levels, traffic slowed down during August. After a smart recovery to 10.5 million tonnes in June 2020, cement and clinker traffic has been declining. It fell to 8.7 million tonnes in July and then to 7.8 million tonnes in August. Year-on-year growth rates have turned marginally negative.Having registered a recovery, the momentum seems to have tapered.
Recovery in freight traffic on Indian Railways indicates an improvement in production of cement & clinkers, pig iron & finished steel, electricity generation and fertilisers and a sharp increase in the distribution of foodgrain. The fall in railways traffic due to the coronavirus induced lockdown recovered completely in August 2020 and saw a near V-shaped recovery.