Sri Lanka lube market stagnant in 2018 on soft-peg collapse, hydro power
ECONOMYNEXT- Sri Lanka’s lubricant market has fallen 0.3 percent in 2018 amid Central Bank trade controls to protect a soft-pegged rupee and rains which reduced thermal power generation.
"The lubricants industry started the year on a positive note, posting growth of 6 percent in the first half of the year," Chevron Lubricants Lanka Chairperson Rochna Kaul told shareholders.
"However, the market weakened in the second half, and as a result, a 0.3 percent decline was recorded for the full year compared to 2017," she said.
The lube market fell 9 percent in the December quarter, Chevron said.
The government had slapped higher customs duties and credit limits on vehicle imports in August and September 2018, reducing imports, the firm said.
The rupee collapsed from 153 to 182 to the US dollar during 2018 and the resulting monetary instability also ended a recovery that started in the first quarter, critics have said.
The Central Bank undermined the government’s free trade policy, and went against promises given to the IMF that controls will not be placed for balance of payments purposes, which come from monetary policy errors.
The Central Bank governor termed the situation as the IMF "understanding" the difficult position Sri Lanka was in.
Kaul meanwhile said that better rainfall in 2018, after a prolonged drought, decreased demand for lube from thermal power plants.
"The strong performance of hydro-power plants in the second half of the year under review decreased demand for lubricants used by thermal power generation."
The slowdown in the construction industry due to reduced liquidity further weakened demand for lubricant products, she said.
Construction firms are strapped for cash, as the government had delayed paying up to 90 billion rupees in dues for infrastructure projects until March 2019.
Sri Lanka’s thermal power production is soaring in 2019. (Colombo/Apr02/2019-SB)