Home ›› 09 Mar 2022 ›› Front
Freight charges of ocean-going vessels rose yet again due to fuel price hikes in the international market, triggered by the Ukraine-Russia war at a time when the global supply chain was still reeling from Covid-19 pandemic.
Industry insiders told The Business Post that after Russia invaded Ukraine, per 40-foot container fare rose by $500 – $2,000 depending on the shipping line and destination, which has directly impacted their business.
The fare was hovering from $14,000 to $20,000 before this conflict, already a significant increase from $2,500 - $5,000 during the pre-pandemic period, they added.
Sources say the cotton prices have also gone up by $0.10 in the international market, causing apparel exporters to once again face pressure from buyers. Moreover, following the invasion, per barrel crude oil price reached $140 globally, which is a 14-year high figure.
Average price of per barrel crude oil stood at $97.59 in the international market on February 25 this year. Russia provides 10 per cent of the world’s oil and more than a third of the European Union’s natural gas.
According to a number of international reports, Freight costs in the Asia-US West Coast and Asia-US East Coast rose 4 per cent and 2 per cent respectively since the invasion.
Md Khosru Chowdhury, managing director of Nipa Group and director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said, “Around 60 containers of apparel goods worth $15 million are ready or almost ready.
“But my buyers have asked me to move slowly because of increasing shipping rates. Forty-foot freight fare to a US destination has gone up by $2,000 within just a month.”
Bangladesh exports apparel goods using two major methods. First is the Freight on Board or FOB method, where buyers pay all shipping charges. Second is the Cost Net Freight or CNF method where exporters have to pay freight or shipping charges.
CNF-based exporters could become major sufferers of the recent freight fare hikes, industry insiders pointed out.
Faisal Samad, managing director of Savar Tex, said, “When we received orders, freight fare was stable. We and the buyers calculated rates based on those rates. We do not know how we will adjust to the current fare
hikes.”
Several apparel exporters said most of their raw materials – such as cotton, woven fabrics, chemicals and other elements – are imported. Freight fare jumped four to five times when the Covid-19 started spreading, which in turn hit goods prices.
Buyers then pressured exporters to reduce products costs due to the already high freight charges.
“The rates went down slightly near the end of 2021, but now, the increased charges have yet again put us in jeopardy,” Samad said.
He continued, “In the apparel sector, we have to spend a large amount of USD on raw material imports. When fuel prices go up, they also impact raw material prices. Besides, additional freight fares also add up to goods prices. A prolonged crisis will impact us
severely.”
Bangladesh Textile Mills Association’s President Mohammad Ali Khokon said, “Though the freight fare has risen slightly, it continues to increase. If fuel prices do not go down, freight charges will go up even higher.
“The cotton prices have already increased by $0.10 per pound because of the fuel price hike in the global market. We will get a clearer picture within March this year.”
Jute industry impacted as well
Jute exporters told The Business Post that some of their goods are usually exported through the Black Sea and Sea of Azov routes, but they had to change their route due to the Ukraine-Russia war.
Bangladesh Jute Mills Association’s Secretary General A Barik Khan said, “Freight fare per container has risen by $3,000 for using the alternative routes. This is putting significant pressure on our industry, and causing our export earnings to drop in the current fiscal year.”
Esrat Jahan Chowdhury, CEO of Tulika-ECO and director of the Bangladesh Jute Goods Exporters Association, said, “We already are suffering due to the high freight fare.
“We have to pay $18,000 as freight costs for exporting jute goods worth $15,000 under the FOB process, which was around $16,000 just a month. We will be in trouble if it continues to increase.”
