In May, commodity prices plummeted as shippers transferred savings from diesel prices have dropped

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In May, commodity prices plummeted as shippers transferred savings from diesel prices have dropped

In May, transporters passed on the benefit of a fall in diesel prices by decreasing freight rates on several routes, the credit rating agency said. Finance Minister Nirmala Sitharaman had on May 21 announced a cut in excise duty on petrol by a record Rs 8 per litre and that on diesel by Rs 6, helping the OMCs lower the prices of the two commodities.

Besides, it also tracks the free cash flows (FCF; pre-EMI) of transporters on an ongoing basis. Higher FCF would typically support demand for commercial vehicles.

Freight rates, too, declined for most commodities but were stable for mining and cement. Freight rates declined month-on-month for consumer essentials, such as agri-products, FMCG/FMCD, loose goods and discretionary goods, it added.

However, fleet utilisation was flat month-on-month and while for the market load, it was higher, which was offset by slightly lower utilisation for parcel/loose goods, mining (largely coal and iron ore), and agri-products, the remaining commodities, including auto-carriers, container applications, fast-moving consumer goods and durables, steel, textile, and petroleum tankers, saw flattish trajectory in utilisation, as per the report.

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  • Due to the high base of April, freight rates for cement and mining applications were flat in the previous month, while rates for auto-carriers, agri-products, container, FMCG/FMCD, petroleum tankers, textile, and steel were in the single digits, according to the report.

  • CRISFrex indicates that freight rates have dropped month-on-month with free cash flow (pre-equated monthly instalment) decreasing 100 basis points, Crisil said. CRISFrex captures the changes in freight rates on a sequential basis.

The complete effect of this duty cut would be visible in the index from next month. This is because the central government set an extrinsic decline in excise duty at the end of the month, whereas CRISFrex represents freight rates and fuel prices for the entire month, it noted.

In May, around 60 per cent of the combinations saw a decrease in freight rates, while around 16 per cent were stable, as per the report.