Riding the storm
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Woke up late this morning and as I was munching my favourite ‘kimbula bunis’ (the crocodile-shaped bun with sugar sprinkled on top), the phone rang. By the way, the decades-old ‘kimbula bunis’ hasn’t lost its glamour and is still a favourite, even among today’s younger generation.Who was calling this early in the morning? It was Kalabala Silva, the often agitated academic.
“How… how are you?” I asked. After greeting me, he asked in return: “Do you know one of the biggest issues that we are having in the economy?”
“Would it be loss of production due to the pandemic?” I replied. “No…no, it’s the problem of rising freight rates. This is not only having an impact on imports but what is worse is that it is making our exports uncompetitive,” he said.
“You’re right, exporters have been complaining about rising freight rates which are squeezing (profit) margins,” I said.
In a Business Times story published last week, Ceylon Association of Shipping Agents Chairman Iqram Cuttilan said that freight rates have shot up to US$3,000+ per 20-foot container this year from $500 in 2019 and still there is no space on containers since China is willing to pay $7,000-$8,000 per container for the scarce space on ships. The shortage of space is due to the growth in China’s export economy since the pandemic and also possibly due to fewer calls by ships at the Colombo port due to reduced imports.
On average, export volumes are 300,000 TEUs (20-foot containers) per year, while there are over 600,000 TEUs of imports per year. Due to restricted imports particularly motor vehicles, the number of import containers is likely to have dropped. Shipping agents have said that unless exporters are willing to pay much higher rates for space, they (agents) would be forced to reduce the space on ships calling at the Colombo port.
Jayantha Karunaratne, Chairman of the Colombo Tea Traders Association, was quoted last week, again in this newspaper, as saying that with freight rates rising, tea exporters are faced with a lot of issues including delayed shipments.
Despite these constraints and the impact of COVID-19, exports have been doing well this year. According to the Export Development Board, export earnings in January-July 2021 were $6.6 billion, up from $5.4 billion in 2020 but lower than $6.9 billion in 2019. The main exports were apparel – $2.9 billion in January-July 2021, $2.4 billion in 2020 and $3.2 billion in 2019; and tea – $765 million in January-July 2021, $702 million in 2020 and $796 million in 2019. Value-added rubber showed an appreciable increase in the same period in 2021 compared to both 2020 and 2019. It was $616 million in 2021, $434 million in 2020 and $535 million in 2019.
As I shared these figures with Kalabala, he asked: “Will the situation improve next year?”
“I am not so sure. Very difficult to predict how economies will pan out in 2022 since the pandemic is likely to go on for two to three years, though by this time many countries would have adjusted to living with COVID-19 in their midst and most populations would have been fully vaccinated and also getting a third dose particularly crucial for at-risk patients,” I added, after which we ended our conversation.
As I took a break before writing my column, I was drawn to the conversation under the margosa tree. It was ‘kimbula-bunis’ all the way this morning with the three friends also eating these favourite ‘hot-hot’ buns, with sips of tea. “Lockdown ekak wage neme neda. Me sumane, paarey godak vahana thibba (It doesn’t look like a lockdown. There were many vehicles on the roads this week),” said Kussi Amma Sera.
“Godak kattiya paarey ehe-mehe giya (Many people were also seen on the streets,” noted Serapina.
“Thavath prashnayak thama, aanduwe kattiya paraspara panivida dena eka (Another problem was that there were confused messages from various government officials),” noted Mabel Rasthiyadu.
“Eka niladhariyek kivva athyavashya weda wala yedena ayata wedata yanna puluwan kiyala. Vena kenek kivva, eka gedarakin ek-kenekuta eliya yanna puluwan kiyala (One official said only those working in essential services are allowed to go to work while another said that one person per household is permitted to come out),” she added.
Furthermore on exports doing well, though tea exports declined by 2.5 million kg to 25.54 million kg in July 2021 compared to the same month last year, largely due to a combination of shipping constraints, logistics and COVID-19 related issues, the cumulative tea exports (in January to July 2021) were up. Shipments in the first seven months of 2021 amounted to 162.52 million kg, up by 10.39 million kg in the corresponding period of last year, according to tea broker Forbes and Walker.
Tea production for the month of July was 26.16 million kg, a marginal decrease from 26.47 million kg recorded in. However January-July 2021 cumulative production rose to 187.78 million kg from 156.94 million kg in January-July 2020.
As I finished writing my column, Kussi Amma Sera walked into the room with a second mug of tea, saying, “Ada wahinna yanne (It’s going to rain today)”.
I nodded in agreement and reflected on the positive news that despite all the COVID-19 problems, Sri Lanka’s exports are doing well and have recovered from a difficult 2020.