In response to vessel re-routings aimed at bypassing the Red Sea, ports in India and Sri Lanka have witnessed a significant surge in bunker demand, highlighting a burgeoning challenge for the maritime sector. While India grapples with supply shortages, Sri Lankan ports are experiencing a notable uptick in activity.
According to S&P Global Commodity Insights, the demand spike, estimated to exceed 30 percent across ports in both India and Sri Lanka, is largely attributed to extended voyages taken by ship owners and charters to avoid the Red Sea region. Consequently, ports on India’s west coast, notably Kochi and Mumbai, are contending with disrupted supplies of Very Low Sulfur Fuel Oil (VLSFO), exacerbating the situation.
Despite the heightened demand, price movements in the bunker fuel market have been mixed as of March 28. Platts, a division of S&P Global Commodity Insights, reported that while 0.5 percent marine fuel oil delivered to Kochi saw a $20/mt increase to $700/mt CFR, prices in Mumbai fell to $698/mt, down by $8/mt. Similarly, in Sri Lanka, prices at Colombo were assessed at $700/mt, reflecting a decrease of $7/mt compared to the previous week.
A trader based in Gujarat highlighted the substantial rise in demand, stating, “Demand has substantially increased, almost by 30 percent across Mumbai, Kochi, and Gujarat ports. Long-haul vessels are calling more often now. The volumes that were being lifted at King Abdullah port, Yanbu, Djibouti, and the Suez Canal have now shifted to Indian and Sri Lankan Ports.” Echoing this sentiment, a supplier based in Kandla noted, “Longer voyages coupled with a shortage of VLSFO at some Indian ports have increased demand at Kandla and Mundra.”
The supply crunch at Indian ports, particularly Kochi, has further bolstered demand at Sri Lankan ports like Colombo and Hambantota. A Bunkerworld survey revealed a significant surge in bunker sales volume at Colombo, reaching 40,000 mt/month, up from an average of 30,000 mt/month prior to the disruptions in the Red Sea region.
Despite the increased demand, Sri Lankan ports remain well-supplied through consistent inflows from Fujairah and Singapore. A supplier from Kochi highlighted the market conditions, stating, “For VLSFO, the queries have reduced a lot as the market knows we’re out of product. Whatever prices are being quoted are only on a best endeavor basis (subject to availability).”
He added, “With that condition, both traders and clients do not want to take any risk. We’re not getting any queries for MGO, and even if we do, it’s only for smaller parcels that would help cover the voyage to cheaper places.” In response to supply shortages in India, traders have redirected their inquiries to Sri Lanka, further driving up demand in the region.
A trader based in Colombo remarked, “Demand has almost doubled since January. Tightness across Indian markets during the first few weeks also helped us to capture the demand. Interestingly, we’re seeing a considerable number of inquiries for HSFO. There are three active high sulfur fuel oil suppliers in the market now.” However, supply constraints persist in India, particularly at major ports like Kochi and Mumbai.
A BPCL official noted the impact of disrupted cargo inflows on VLSFO production, stating, “Kochi remains dry. BPCL does not buy spot purchases; we might have been getting sweet crude cargoes from the Mediterranean, but the crisis has disrupted cargo inflows and thus the production of VLSFO has been hit.” Meanwhile, an IOCL official shed light on the challenges faced by refineries, stating, “The IOCL refinery in Gujarat underwent a partial shutdown in February while the demand surged due to the Red Sea. Initially, the refinery was producing in line with market demand.”
He added, “However, we found ourselves actively pursuing traders to understand why demand wasn’t picking up at Kandla port when demand was low at the time. Consequently, we slightly reduced production.” With the spotlight on India’s bunker fuel production, it’s revealed that the entire production comes from only three refineries, out of which HPCL and BPCL have lowered output.
In Haldia, while demand remains high, supply falls short of requirements due to maintenance issues at the local refinery. The top suppliers of bunker fuels in the Indian market, including IOCL, BPCL, and HPCL, continue to navigate challenges to meet the escalating demand.
Source: ANI
