Freight margins have shown some recovery in December as mining, steel and cement freight rates saw a healthy one-month increase in December, and fuel prices stabilised.
For December, CRISIL’s freight index is back to festive levels seen in October, after the extended south-west monsoons negatively affected rates in November. With fuel prices stabilising, the uptick in business in mining, steel and cement is translating to an increase in margins.
During December 2021, the freight industry saw a margin (free cash flow) of 20 per cent, a five-point bump from November at 15 per cent. Margins in December were the highest since February 2021.
“Industries such as mining products (coal, iron ore, and limestone), cement and steel are seeing a sequential recovery as freight rates for these applications have improved by more than 5 per cent. A key driver for this improvement is the resumption in construction and mining activities, which were subdued in December after a slow November due to prolonged monsoon.” said the CRISIL report.
“Discretionary goods such as automobiles and textiles also saw an improvement in freight rates. The improvement in auto carriers is driven by a slowly improving scenario in terms of vehicle dispatches (which has thus far been marred by supply issues), while that in textile is driven by restocking of inventory in December after festive buying seen in November.” the report added.