Sri Lanka’s bunkering market at full speed on the progression of ports and the monsoons in India
Sri Lanka’s bunker market is expected to experience a surge of growth as it expands its Port of Hambantota, among other initiatives, while welcoming additional demand in the near term due to the looming monsoon season in India, although some obstacles remain, industry sources said.
“The demand for bunker fuels is considerably good [in Sri Lanka] compared to last month … we saw a bunker [volumes] go from 1,100 t to 1,500 to 2,000 t / day, ”said a Colombo-based bunker trader.
Demand at the main Colombo bunkering center increased from around 20,000 mt in March to 26,000-27,000 mt in April to around 36,000 mt in May, a Colombo-based supplier said.
“Demand so far suggests that [June] the volume should be stable from May.
The volatility of oil prices, however, is a concern, the trader said.
Bunker fuel prices in India are generally lower than in Sri Lanka, as the latter buys most of its bunker fuel from Singapore and Fujairah, making the fuel more expensive.
According to Platts data, the 0.5% S bunker of marine fuel delivered to Mumbai cost an average of $ 547 / mt from June 1 to 23, less than the same quality delivered to Colombo, which averaged $ 576. .04 $ / mt over the same period.
India’s summer monsoon, which typically begins in June and ends in September, is likely to hamper bunkering operations somewhat, industry sources said.
“Bunkering operations go smoothly at anchor, but the OPL [outer port limits] deliveries have been suspended in Mumbai and most other western and eastern ports due to the monsoon in India, ”said an Indian trader.
OPL deliveries will likely remain suspended until the end of August.
“There has been no availability at the eastern ports of India due to our requests being diverted to neighboring ports,” added the trader.
A source at a refinery said the Indian port of Kochi “will not be able to handle the full supply” due to limited barge operations once the monsoon sets in.
“However, at the end of the day, it’s all about the price. The prices will determine whether the shipowners and operators supply the ports of Sri Lanka or India, ”he said, adding that there could be a potential transfer of 5% to 6% to Sri Lanka in the past. during this period.
A bunker supplier in India echoed a similar sentiment. He said part of the demand could go to ports such as Trincomalee and Hambantota in Sri Lanka.
The aspirations of the Port of Hambantota
The Port of Hambantota, located on the southern coast of Sri Lanka, is less than 10 nautical miles from the main Asia-Europe sea route and is strategically located on China’s Silk Sea Route.
Platts previously reported, citing the Sri Lanka Ports Authority, that the $ 1.5 billion port has eight tanks capable of storing a total of 51,000 m3 of marine fuel.
During the week ending June 18, Ceylon Petroleum Corporation said it had signed an agreement with the Hambantota International Port Group to develop the Port of Hambantota as a strategic energy center in Sri Lanka.
A separate storage terminal with associated facilities for domestic and export purposes connected to the port via a pipeline is to be established by CPC, approximately 15 km from the port, to increase its storage capacity.
HIPG awarded Sinopec Fuel Oil Sales Co. a tender in 2019 to provide marine fuel and other ancillary services to vessels calling and passing through Hambantota.
“Sinopec, with its vast resources, secures the supply of VLSFO and MGO to Hambantota, enabling the port to serve all ships using the main sea routes of the Indian Ocean,” said Tissa Wickramasinghe, COO of HIPG, in a press release on June 14.
LPG transshipment and delivery for local consumption is also part of HIPG’s energy mix, while Intertek Lanka (Pvt) Ltd has also set up an oil testing laboratory in the port to provide services to the energy hub. , he added.
Meanwhile, the recently passed Colombo Port City Economic Commission Bill paves the way for the establishment of a Special Economic Zone on approximately 269 hectares of reclaimed land near Colombo Port. .
The “Colombo Port City Special Economic Zone” will be an international business and service hub with specialized infrastructure and other facilities to promote economic activity, including international trade, shipping logistics operations. and other services, according to a document seen by Platts.
The move looks positive, but “it’s too early to comment on its effect on bunker sales,” another trader said.
While the development of the Port of Hambantota is a step in the right direction for Sri Lanka to increase the country’s bunkering business, but for volumes to increase there needs to be healthy competition, another Colombo-based trader said.
“There is room for growth, but the price inelasticity is not helping,” said a Colombo-based supplier.
One of the Colombo-based suppliers, who had parked a barge at Hambantota in the hope that bunkering volumes would gradually increase there, had recently returned the vessel to Colombo because the barge was not in full use, sources said. from the market to Platts.