Sri Lanka will likely benefit from a possible bunkering demand shift from India due to pricing economics to emerge as a key regional marine fuel hub, especially by developing newer ports such as Hambantota, industry sources told S&P Global Platts.
Tightening availability of very low sulfur fuel oil in India has irked some participants in the country, they said.
“Whatever stock is available at the moment, is selling out at a fast pace,” a Mumbai-based bunker trader said, suggesting a strong demand for cleaner fuels.
Charterers and coastal guard ships consume majority of the stock in India’s local market, thereby limiting availability to foreign ships, sources said.
In contrast, availability is high in Colombo, sources said.
The restricted availability of VLSFO in India is also reflected in its prices, they said.
Typically, bunker fuel prices in India are usually lower than those at Sri Lanka as the latter mostly sources its bunker fuel from Singapore and Fujairah, making the fuel costlier.
The Mumbai delivered marine fuel 0.5%S bunker price averaged $399.66/mt during Sept. 1, 2020-Jan. 29, 2021, lower than the same grade delivered in Colombo, which averaged $404.85/mt.
However, the spread between Mumbai and Colombo delivered marine fuel 0.5%S bunker prices hit $23/mt on Feb. 9 and Feb. 10, the widest since S&P Global Platts began assessing the grade at both locations on Sept. 1, 2020.
“Demand has picked up in Colombo due to the price difference,” a Colombo-based bunker trader said.
Sri Lankan ports
Current ample availability has led sellers to now be able to offer product deliverable at ports such as Colombo and Trincomalee on a prompt basis, some up to four days forward compared with spot delivery, which was possible only 9-10 days forward in the recent past.
This comes after the Sri Lanka Port Authority said Jan. 13 that operations at the Port of Colombo have normalized from challenges posed by the coronavirus pandemic.
Movement between the three terminals has been restored while yard density across the terminals is close to optimal operating levels, significantly improving interterminal transportation, it said then.
The Colombo port currently has three container terminals: Jaya Container Terminal, South Asia Gateway Terminals and Unity Container Terminal.
Plans also are underway to ramp up operations at the Hambantota port.
Sri Lanka’s Hambantota port, located on the southern coast, is within 10 nautical miles of the main shipping route from Asia to Europe and holds a strategic position on China’s Maritime Silk Road. It is part of the country’s global development plan under China’s Belt and Road Initiative.
The $1.5 billion port has eight tanks capable of storing a total 51,000 cu m of marine fuel, according to the Sri Lanka Ports Authority, Platts reported earlier.
Hambantota International Port Group, or HIP — a joint venture formed by the Sri Lankan government and China Merchant Port Holdings — awarded Sinopec Fuel Oil Sales Co. a tender in 2019 to provide marine fuel and other ancillary services to ships calling and passing through Hambantota.
In April 2020, the Chinese Embassy of Sri Lanka said on its Twitter account that HIP welcomed its first oil tanker, Melody, which berthed at the port to discharge fuel and commence bunkering.
“Tanks are ready, VLSFO is already stored … It’s only a matter of time before physical supply ramps up at Hambantota,” an industry source based in Colombo said.