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India: Weak demand to hurt bunker industry; LSFO prices fall 15%

India’s bunker prices have declined sharply by as much as 15% due to a slump in demand as the country grapples with the deadly coronavirus pandemic by imposing a nationwide lockdown including ports.

Bunker suppliers in India have seen marine fuel enquiries drop sharply in recent weeks, and the trend is likely to continue, with some pointing to a minimum 10%-15% year on year fall for 2020 in bunker fuel demand as trade slows during this lockdown.

Mumbai Marine Fuel 0.5% bunker fuel price was assessed at $322.50/mt Thursday, down $57.50/mt or 15.13% from $380/mt a week earlier, S&P Global Platts data showed.

“We are working from home and we are still giving price indications as and when we receive inquiries but these are few because India is in lockdown,” a bunker supplier said, adding that it was difficult to guarantee delivery as the situation remained fluid.

“Supply is basis best endeavors,” he said. Other suppliers said they were also quoting delivery on “basis best endeavors” and added that even though there have only been a handful of inquiries received this week, no deals were heard concluded.

“Shipping and logistics has been affected so even if there’s a deal, you won’t know when you will get the delivery,” another India-based bunker supplier said.

Due to a nationwide lockdown, close to half a dozen ports including Krishnapatnam, Dhamra, Mundra, Tuna, Gopalpur, Karaikal and Gangavaram have declared force majeure, according to letters issued by their respective port authorities, copies of which were seen by Platts.

The demand for bunkers was already hit earlier when India imposed a 14-day quarantine on shipping vessels arriving from ports of countries affected by coronavirus. This slowdown will now accelerate.

Demand is tepid even though bunker fuel prices in the country are low.

“We’ve adjusted our price indications for Mumbai LSFO from $335/mt on Monday to $310/mt on Thursday,” the supplier said, adding that they were testing the market to see if demand emerged as prices were lowered further.

LESS SHIPMENTS, LESS BUNKERS
The unprecedented lockdown has reduced demand for everything from consumer products to energy-related commodities.

It is a cataclysmic situation where shutdown implies airlines have come to a grinding halt and there is no demand for jet fuel. With few automobiles on the roads means less gasoil and gasoline requirements.

This in turn is hurting the demand for bunkers as less ships are moving refined oil products out of India, sources said. India is one of the world’s largest importer of crude and exporter of refined oil products.

Lesser shipments results in lower demand for bunkers. A fully laden VLCC bringing crude to India at a speed of 13 knots consumes close to 55-70 mt of bunkers daily and the corresponding number for a Long Range, or LR tanker moving gasoil or jet fuel from the country to Europe will be 28-39 mt, according to the estimates of brokers.

Suspension or slowdown of online shopping from e-commerce websites has also hit the movement of consumer goods in container ships. Textile exports in container ships have taken a major beating, said a shipping executive involved in this trade.

Container ships are among the largest consumers of bunker fuel.

LOGISTICS & BUNKERING
Despite categorical assurances from the government, including the petroleum minister, Dharmendra Pradhan, on essential commodities, the reality on the ground is far from normal.

“There is no work force coming into these ports. Everything has come to a standstill,” a dry bulk chartering source said.

Krishnapatnam port declared force majeure because the police are restricting movement on the roads and therefore trucks and stevedores are unable to reach the workplace, another chartering source said.

While India’s federal government has issued an order saying transport service of goods by water and their loading and unloading is an essential service, it has also permitted port authorities to declare force majeure and operations in several ports are currently badly hit, according to sources on the ground.

“We are not sure if demand will come back any time soon but with the notices and closures issued by the authorities, it is very difficult to discuss deals,” a third bunker supplier said.

“Demand is going to be disrupted for the next couple of weeks for sure. I am not giving indications at all because there are no inquiries,” he added.
Source: Platts

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