Freight fares dip 5-10% after sharp rise

Freight charges – which witnessed a sharp rise as exports picked up momentum after easing of Covid-19 restrictions – have dropped by 5 per cent to 10 per cent, providing a much needed breather to Bangladesh’s apparel exporters.

A number of exporters told The Business Post, since early November, many vessels bound for US and European destinations dropped their freight charges by $1,000-$2,000 per 40 TEUs (twenty-foot equivalent unit) of containers, and the fares have stopped increasing for now.

The emergency booking price for freight also remains stable, which was increasing steadily during the pandemic period, the stakeholders said, expressing optimism that the charges will drop further in the early 2022.

They further hoped that freight charges in vessels bound for US and European destinations will go down from the current rate of $15,000-$22,000 per 40 TEUs to $10,000 by the end of next year.

Exporters however pointed out that the current freight charges are still at least three times or more higher compared to the pre-pandemic period.

On the issue, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Vice President Shahidullah Azim said, “When the pandemic started, vessels had to maintain quarantine for long periods of time.

“To tackle this global issue, vessels playing every shipping line increased their freight charges four to fivefold.”

He continued, “The quarantine measures have now been eased, and more vessels are now available for transportation of cargo. Although the freight charges have gone down, the difference is very small.

“Some exporters are getting a lower rate, but most of them have to pay a minimum of $15,000 [per 40 TEUs] to a US-bound vessel.”

It is good news that freight charges are now dropping, and we expect it to go down further from next year, Azim said.

Industry insiders said though the buyers usually pay freight charges, it is still one of most important factors in the apparel sector. When these charges get high, buyers’ purchase costs go up too, and they always try to reduce product costs.

Besides, high freight charges increase import costs of raw materials and directly impact the manufacturing costs, they added.

Booking charges still sky high

Though the freight charges went down slightly since early November, apparel exporters are still paying $18,000-$20,000 for emergency and standard bookings in vessels bound for US or European destinations.

Addressing the matter, Nipa Group’s Managing Director Md Khosru Chowdhury said, “I booked a US-bound vessel for $15,000 last week, which was $17,000 just a couple of weeks ago.

“Sometimes, the fees reach $20,000 or more, a steep rise compared to only $4,000-$4,500 in the pre-pandemic period.”

A shipping agent said the freight charges will drop in phases, as the pressure of imports and exports is easing globally in the new normal period, added Khosru, who is also a BGMEA director.

Terming the latest drop in freight charges a minimal one, Rupa Group’s Managing Director Shahidul Islam said, “It will take more time to return to normalcy. However, we are hopeful because the charges have not gone up since the last month.”

Bangladesh Shipping Agents Association’s President Syed Mohammad Arif said, “Though the containers had to be transported at very high prices for a long time, the trend of continuous freight rate hikes has now stopped.

“Maybe some of the exporters are getting a lower rate, but it is not possible to say why the charges are going down. The rate at which the containers have to be shipped is still very high.”