Supply Shortages and Surging Demand: India Ports Feel the Pressure Amid Red Sea Crisis

In response to vessel re-routings aimed at avoiding the Red Sea, bunker demand across ports in both India and Sri Lanka has surged significantly, presenting a mounting challenge for the maritime industry.

India is grappling with supply shortages, particularly evident in ports on the west coast like Kochi and Mumbai. Conversely, Sri Lankan ports are experiencing a notable increase in activity.

The demand spike, estimated to exceed 30 per cent in ports across both countries, has been primarily attributed to longer voyages taken by ship owners and charters to circumvent the Red Sea region.

Despite the increased demand, price movements in the bunker fuel market have been mixed as of March 28. While some ports saw price increases, others experienced decreases.

Platts, a division of S&P Global Commodity Insights, reported that while 0.5 per cent marine fuel oil delivered to Kochi saw a USD 20/mt increase to USD 700/mt CFR, prices in Mumbai fell to USD 698/mt, down by USD 8/mt. Similarly, in Sri Lanka, prices at Colombo were assessed at USD 700/mt, reflecting a decrease of USD 7/mt on the week.

A trader based in Gujarat highlighted the substantial rise in demand, emphasizing the shift of volumes from Red Sea ports to Indian and Sri Lankan ports.

Similarly, a supplier based in Kandla noted the impact of longer voyages coupled with a shortage of VLSFO at Indian ports, leading to 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, indicating a shift from an average of 30,000 mt/month to 40,000 mt/month following disruptions in the Red Sea region.

Despite increased demand, Sri Lankan ports remain adequately supplied through consistent inflows from Fujairah and Singapore.

In response to supply shortages in India, traders have redirected 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.

Officials from BPCL and IOCL shed light on the challenges faced by refineries, including disrupted cargo inflows impacting VLSFO production.

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 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, presenting challenges for meeting escalating demand.

In Haldia, demand remains high, but supply falls short due to maintenance issues at the local refinery.

Despite challenges, top suppliers of bunker fuels in the Indian market, including IOCL, BPCL, and HPCL, continue to navigate obstacles to meet demand.

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