Export-import cost rises as sea freight rate trebles

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The Daily Star  January 15, 2021 

Export-import cost rises as sea freight rate trebles

Acute container shortage partly to blame

An ocean-going vessel with containers on board is seen in the Karnaphuli river in Patenga. Photo: Star/File Dwaipayan Barua

Both import and export costs have risen after the sea freight rate trebled in two months because of an acute shortage of empty containers and a rise in demand on the Asia-Europe and transpacific routes.

More than 90 per cent of Bangladesh’s $100-billon external trade is seaborne.

Businesses say they are already facing higher import and export costs because of the rising sea freight rates.

Most of the mainline operators started raising freight charges in November because of the congestion at several ports in Europe and Southeast Asia for the coronavirus-induced lockdown, which created a shortage of empty containers. 

Moreover, the demand from US and European retailers rose ahead of Christmas and New Year and the Chinese New Year in February.According to the BBC News, a surge in demand for imports and log-jam of empty containers are creating bottlenecks at UK ports. 

On December 1, CMA-CGM, the world’s fourth-largest container shipping line, announced to increase freight rates to $1,175 per 20-foot containers and $1,375 per 40-foot container for the routes between North Europe and North-West India.

On January 8, the shipping line hiked a new rate on the same route to $2,000 for a 20-foot container and $2,500 per a 40-foot container.

Muntasir Rubayat, head of operations of shipping agent GBX Logistics, said the rebound in economic activities in China and the peak in demand for goods in the US and European markets ahead of Christmas and New Year holidays caused the shortage of containers globally.

“Chinese manufacturers are rushing to fulfil orders and are willing to pay higher freight rates,” said Rubayat, adding that this led shipping liners and container owners to shift their containers to China to serve the inter-pacific routes between China and America.

As a result, there is a severe shortage of containers for intra-Asia trades and other trade routes, he said.   

The slow return of containers from American ports has exacerbated the situation, as many liners do not want to bring back empty containers to Asia as it costs them. If Asian exporters want the containers, the liners can transfer the cost onto them.

This is causing a long delay in shipments from other origins.

Local importers who have initiated to import commodities such as chick peas, lentil, peas and wheat from Australia, Canada, Egypt and other countries eyeing for next Ramadan are facing problems in receiving timely shipments.

In November, Chattogram-based BSM Group opened letters of credit to import a huge quantity of lentil, chickpeas and other goods from countries such as Australia, Russia, Canada and Ukraine. It is yet to get the shipment, said its chairman Abul Bashar Chowdhury.

“It needs several hundred containers for bringing those goods, and the suppliers informed that they would not be able to deliver the shipment until the end of February due to the shortage of containers,” said the commodity importer.

“Due to the higher freight rates, the import cost of the goods will go up by $20 to $25 per tonne.”

Masudur Rahman Bhuiyan, a Chattogram-based fruit importer, is looking to import 70 containers of apple from China this month.

In October, he paid $1,800 to $2,000 to bring each 40-foot refrigerated container from China, but now the freight charge reached $5,000.

“The increase import cost will surely have an impact on the price of goods when they are sold,” Bhuiyan said.

The hike in the shipping freight will also affect the country’s export of readymade garment since the raw materials are imported.

Syed M Tanvir, a director of Pacific Jeans Group, a denim exporter, said the company was already counting higher import costs to buy fabrics and other accessories from China since suppliers were adding the hike in container freights with the price of the products.

“We have to compromise on our profit margin as we can’t adjust the higher cost to the price of our finished products that have been pre-ordered,” said Tanvir.

The delays in the shipment of the raw materials from China are disrupting production and forcing exporters to use expensive air shipment to meet the deadlines, he said.

If they can’t supply products within the agreed date, buyers may seek a discount.   

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