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India's COVID-19 surge to unleash drastic disruptions in maritime industry: sources

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India's COVID-19 surge to unleash drastic disruptions in maritime industry: sources

Highlights

Singapore, Fujairah among ports banning India-related crew change

Bunkering schedules likely to go awry on potential delays

N Asia maintenance season may spur Indian oil products exports

Singapore — The ongoing second wave of the deadly coronavirus pandemic in India is expected to snowball into a major disruptor for the shipping and logistics industry as several ports globally are shunning ships which have called at any location along the South Asian coastline.

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Bunkering operations could also come in the ambit of this catastrophic wave that has engulfed India, although no major disruptions have been noted yet as demand has been lackluster, bunker industry sources said.

The impact on global shipping logistics from India's isolation could become a very significant market disruptor by causing delay in supply of ships, said Ole-Rikard Hammer, oil and shipping analyst with Oslo-based Arctic Securities. This will obviously tighten the tankers' supply, Hammer told S&P Global Platts.

There are serious concerns over several ports refusing to allow crew changes in those ships which have called on Indian ports over the previous 14 days.

Singapore has already banned ship crew changes for those with recent India-related travel history while Fujairah -- another major bunkering hub -- has also prohibited such crew changes from vessels arriving from India.

Voyage from India to several ports in Asia is less than two weeks, and this implies that the ship will have to idle away for a few days before being eligible to enter its next port of call for bunkering, loading, unloading, crew change, dry docking or even routine maintenance.

Bunkering schedules will go awry, daily earnings will be hit and ships will seek to offset it by seeking higher freight for India-bound voyages, several shipping sources in Asia and Europe said.

If things play out similar to what was seen last year during the first lockdown in India, there will be a sharp drop in local demand and most of this difference will be diverted for exports, said Ralph Leszczynski, who heads research at Genoa-based shipping broker and consultancy, Banchero Costa.

Due to ongoing refinery maintenance season in North Asia, Indian refiners may capitalize on this by giving a boost to product exports, particularly to Southeast Asia and Australia, Leszczynski said. This will help revive freight of Long Range I and II tankers, as until now refinery utilization levels in India has remained high, he said.

According to the latest government data, India's average run for all categories of refineries in India rose to 99% in March compared with 97% in the previous month. An Indian refinery source said in the week ended May 8 that run rates were still around 90%-95% and there was no immediate plan to cut them.

Bunkering impact trickling in

India, home to 12 major ports, has already reported a drop in cargo handling traffic, which could be further exacerbated should a nationwide lockdown be imposed.

According to the Indian Ports Association, the provisional traffic handled at these ports during April 2020 to March 2021 fell 4.59% year on year to 672.6 million mt.

India's Prime Minister Narendra Modi has abstained from implementing a nationwide lockdown so far this year. This comes after such a lockdown last year battered the economy severely.

However, a nationwide lockdown could be a possibility as pressure mounts due to the difficult situation, sources told Platts. In any case, a series of over two dozen province-specific lockdowns across the country are already being implemented.

On the bunkering side, the spike in COVID-19 cases has not led to a significant impact yet, unlike some other oil product markets, as demand has been tepid and shipowners were making preparations to avoid delays, sources said.

For vessels bunkering around India's ports, shipowners have begun arranging for bunkering operations in open international waters, and to avoid berthing as far as possible to mitigate the risk of infection, market sources said.

Still, the time taken for bunkering operations has 'definitely' increased at some ports because one needs to follow various safety protocols, a bunker trader said.

In the port of Visakhapatnam, for instance, where bunkering is carried out through tank trucks to barges and then to vessels, supply disruptions were heard due to fewer truck drivers, another local trader said.

However, some ports such as Mumbai and Kochi have been relatively unscathed, market sources said.

First week of May started with good business in Mumbai and operations have been normal, a trader there said.

Prices at Mumbai were still competitive to Colombo, indicating that there were enough product availability in the country. The delivered Marine Fuel 0.5% sulfur price at Colombo averaged $555.21/mt in April compared to $535.17/mt in Mumbai for the same month, according to Platts data.

Still, as the situation is still fluid, "we have to wait and see what happens in the coming weeks," a bunker supplier said.