Freight rates rising sharply
Exporters are incurring higher costs with skyrocketing freight rates and the crisis is worsening as space on ships is reaching a critical stage.
Space on ships is getting critical and rates have gone up from Far East ports and when compared to Sri Lanka local exporters quote relatively lower rates, so ships give space for those that give a better yield, Ceylon Association of Shipping Agents Chairman Iqram Cuttilan told the Business Times.
The turnaround time or the time taken to clear a vessel that gets delayed by 7-8 days in one port causes delays that impact on the space availability from the Far East to Europe and the US.
COVID-19 is said to be one of the reasons for the increase in rates and shortage of space available on vessels.
He pointed out that unless exporters are willing to pay much higher rates for space, shipping agents will reduce space.
Exports from Sri Lanka have increased this year compared to 2020 and 2019.
On average export volumes are 300,000 TEUs per year and over 600,000 TEUs of imports per year; and this export volume has increased by 6-8 per cent compared to the 1H of 2019 and compared to last year they have achieved almost 30 per cent more this year, Mr. Cuttilan explained.
In this respect, the demand for space from the Far East to Europe has grown and there have been delays at the Europe and US ports and even in the Far East as a result of which cargo is also getting built up in ports, he pointed out.
Freight rates from Colombo which was applicable in 2019 was about US$500 for one TEU but now it has shot up to $3000 plus but still you cannot get the space since ports like China are willing to pay between $7-8000 per TEU and air freight is also expensive to consider using that as an alternative, Mr. Cuttilan pointed out.
Exporters are clearly impacted by these increased freight rates as their marketability is affected as high paying cargoes impacts severely.
Exporters like Imperial Teas Chairman Jayantha Karunaratne who freights Ceylon Tea and is also the Chairman of the Colombo Tea Traders Association (CTTA) complained the situation is worsening.
“It is getting worse compared to last week since freight rates are increasing we are faced with a lot of issues and shipments are delayed,” he noted.
Some shipments are packed and ready in factories but due to the non-availability of vessels and containers and expensive freight rates they are unable to ship them out.
Freight costs have increased three times the usual rate compared to 2020 and “there is nothing much we can do”, he said adding that they are compelled to absorb the losses.
Meanwhile, the cost of packing materials has also increased by about 25-50 percent for metal caddies, master cartons and box board since the price of paper in the international market has risen due to the COVID-19 pandemic, Mr. Karunaratne said.