Cost Reduction Opportunities in East-West Sea Route by using Hambantota Port
1. Introduction: East-West (AG?FE) sea route which connects the Persian Gulf to the Far East is one of the world?s busiest sea route which transports ~60% of the global crude oil. This is a ~10,000km route which connects the Dubai port with Shanghai. This route stretches past the busiest trade route of Malacca Strait which contains ports like Port Klang and Singapore. This whitepaper discusses about cost reduction opportunities in using the Hambantota port for refueling and services refurbishment rather than opting Singapore ports. 2. Market Outlook: a) Current Industry Practice: VLCC vessels operating in the East-West Sea Route currently use utilize Singapore, Indian ports, Thailand and Malaysian ports for refueling, stock replenishment, maintenance and services. This increases the lead time of the total supply chain by 3.5 days. Increasing congestion and high port utilization are threatening the increase in total transit time and increase freight costs due to the same. b) Alternative Model: Sri Lanka port of Hambantota, which lies 12km form the East-West lane has become operational, this can acts as hub for refueling, repair and restock point for large carriers such as VLCC sailing in East-West sea route. Using this port is advantageous as it can reduce the total transit time and associated fuel costs, thereby allowing economies of scale for shippers using VLCC carriers.
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