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November 22, 2016

Volume 7 Issue 8

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Marine Market Dries Up in Sri Lanka

Sri Lanka’s demand for marine lubricants plummeted last year, and some observers blame high import duties for driving up local costs and steering shipowners to buy lubes at other countries’ ports.

The island nation’s consumption of marine oils fell 38 percent in 2015, a year when total lubricant grew by 7 percent, according to a recent report from the Public Utilities Commission of Sri Lanka.

While the PUCSL reported that the island nation’s marine segment made up just 3 percent of its overall 51,000 metric tons market, or around 1,500 tons, some observers said it’s unlikely that number represented the country’s actual demand.

Reporting on Sri Lanka’s marine lubricants sector is unorganized, said T. G. Jayasinghe, chairman and managing director of Ceylon Petroleum Corp. Ship owners in Sri Lanka purchase lubricants from various sources, including five or six bunker suppliers operating from sea, and those sales are not taken into account, he told Lube Report Asia.

Others said sales of marine lubes are shrinking and put the onus on high import duties that Sri Lanka levies on lubricants and their raw materials. B.B. Patra, IOC Lanka’s senior vice president, pointed out that high duties for raw materials push up prices on finished lubes blended domestically, making them less competitive than comparative products in other countries.

“Imports become costly due to the taxation policy of the Sri Lankan government,” he said. “On a purchase of raw materials worth Rs 100, they end up paying Rs 56 as a tax. The government has once again increased tax on lubricants this year by 4 percent, which makes the total tax 56 percent in Sri Lanka.” Sri Lanka’s rupee is devaluating, which exacerbates the problem.

“Lubricants are cheap in Singapore and Dubai, therefore shipowners are purchasing lubricants from there,” Patra added. Singapore has domestic supply of base stocks and lubricant additives, and the United Arab Emirates, where Dubai is located, has tax policies generally viewed as favorable to business.

PUCSL concurred that lubricants in Sri Lanka are relatively expensive. “It appears that larger vessels that call over at Colombo Port do not take lubricants from [suppliers in Sri Lanka],” said Jayant Herath, the commission’s director of corporate communications. “They get lubricants from other ports, such as Singapore and Fujairah [also in the U.A.E.], where the lubricants are priced lower. Smaller vessels that do transhipments are the main users” of marine lubes locally.

Herath said Sri Lanka’s lube market is not developing as the government would hope, and that demand will most likely remain stagnant in 2016.

“Overall, the market is not in good condition,” Patra claimed, noting that the government has decided to grant up to seven more of the licenses that it requires of companies selling lubricants. Patra said that could for some of the existing 13 suppliers out of the market.

Meanwhile, Jayasinghe said CPC will enter the marine lubes market in 2018 as its lubricants plant is slated to come onstream by December 2017.