News
Hambantota port, construction and apparel industries hit by Covid-19
Sri Lankan businesses, including the Hambantota Port, are now beginning to feel the pinch of the Covid-19 outbreak.
The Hambantota International Port Group (Pvt) Ltd (HIPG) had planned to start bunkering in March but that has been delayed because specialists working on tank farm refurbishment went home for the Chinese New Year and are unable to return. However, the farm received Lloyd’s classification on Friday.
The major business of Hambantota Port remains roll-on/roll-off (RoRo) vehicle imports. Much of it is transhipment cargo. These volumes are still coming in but there was a drop starting February. A further decline of five to eight percent is anticipated commensurate with a global downturn, a company spokesman said.
The construction industry is badly affected, said Nissanka Wijeratne, Secretary General and Chief Executive Officer of the Chamber of Construction Industry.
“We import ceramics, tiles, bathroom fittings, electrical fittings, air conditioner plants, doors and windows for China and shipments are completely cut off right now,” he said. “Thirty percent of our Aluminum comes from China. So do spare parts for heavy machineries, even the European-built ones.”
“There really is no way to replace material imports from China,” he continued. “If, for instance, spare parts were to come from Europe, they would take six months to reach and that is way too long.”
Businesses in imports, garments and pharmaceuticals are now feeling the pinch of global supply chain disruption, said Shiran Fernando, the Chamber of Commerce’s Chief Economist. He expected cost of production to rise owing to an increase in surcharges on freight and other components of the import process.
There are costs associated with non-availability of shipping slots or schedules convenient to importers. Some vessels cannot even reach certain ports. These delays will cripple a gamut of sectors.
Textile and clothing production has stalled in parts of China, affecting manufacturers and exporters in Sri Lanka who have no raw material to feel demand.
“Sri Lanka is heavily dependent on China for fabrics and textiles worth approximately US$ 850mn,”said Tuli Cooray, the Assistant Secretary General of the Joint Apparel Association Forum (JAAF). There has been no supply since the Chinese New Year although markets had planned to resume by the end of February. When the do finally open up, the resulting congestion will lead to high transport costs.
“No materials, means no work,” Mr Cooray said. But salaries still have to be paid. That is an added cost with no revenue to meet it.
He estimated the total loss to be around US$ 500mn. But he expects supply to recover thanks to new strategies being introduced in China. But heavy traffic might result in exporters having to air freight, which is more expensive.
As with most sectors, small and medium enterprises will be worst hit by a potential order crunch, Mr Cooray said, adding that JAAF will soon form a proposal on the industry’s next plan of action.
“This has opened the eyes of the business world,” he reflected. There were opportunities in the situation. China’s own customers might divert their business elsewhere and Sri Lanka could stand to gain, provided it was ready. The Chinese could themselves outsource their production.
The Sri Lankan industry–comprising just seven apparel manufacturers–must offer quality and price as well as meet delivery targets. And it needed to produce its own raw materials.