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Sri Lanka exporters, importers battle high rates, box shortfalls to maintain trade lifeline
Sri Lanka’s exporters and importers are working against multiple global and domestic logistics disruptions in the post-Covid-19 period to keep exports ticking and supply the country with essential foods and raw material as freight rates soar.
Exporters are also facing shortfalls of containers with import controls in Sri Lanka, compounding global bottlenecks in shuttling empty containers.
Though freight rates have started to stabilize gradually from Covid-19 peaks, Sri Lankan shippers are paying high rates and battling capacity bottlenecks.
Perfect Storm
Freight rates from Colombo to Europe, China and Hong Kong have jumped over 200 per cent, to the US over 150 per cent and to Singapore over 100 per cent, Sri Lanka’s Shipper Council Chairman Suren Abeysekera said.
Freight rates were competitive before the Covid-19 pandemic, helped by large container ships coming into service, but pandemic disruptions rapidly pushed up rates as ships were taken off service reducing capacity.
The Shanghai Freight Index has jumped three-fold compared to 2019 last quarter while the Drewry’s World Container Freight Index also shows a threefold jump from 2019 with the average spot freight rate jumping from 1500 dollars in March 2019 to 4800 dollar by March 2021, Abeysekera said.
“In my 21-plus year experience I have never seen something like this before,” Abeysekera said calling it a ‘perfect storm’ in ocean freight.
The resurgence of economic activities after Covid lockdowns ended, and the rush to build up stocks had created congestion in the global logistics system.
Shipping companies were making large profits and orders have also been placed at shipbuilders.
“Whatever that stopped during COVID, couldn’t come back to its former glory even though the industry came back quickly to match the consumer demand,” Abeysekera explained.
Costly Delays
Across the logistics chain, there are delays and congestion, which is a cost to shippers.
“Congestions created at ports amplify this issue with ships spending more time close to ports rather than moving cargo on water,” Abeysekera said.
While global trade has not actually grown, it is the disruptions and delays that are causing capacity problems, he said.
“Remember the number of ships in the world has not suddenly increased but most are out of schedule creating havoc to demand when it needs supply.”
“It is our understanding that the current volatility in the ocean freight market would continue throughout 2021 and shippers in the country should adapt to the new norm in containerized shipping,” he said.
The industry has taken a number of initiatives to mitigate the situation; more innovations are being underway, but there are also measures that authorities can take, he said.
Box Shortfall
Overall ships are fuller than before, reducing the ability of shuttles to be emptied.
Globally there were difficulties in getting hold of empty containers and also specific types such as food-grade boxes, refrigerated containers and different sizes such as 40-foot containers and 20-foot containers.
Vessels delaying their return to Asia due to congestion in export destinations had also contributed to a shortfall of containers in Asia. Others have also got stuck in inland ports.
There is at least one investigation by regulators to probe whether an artificial shortage is created, he said.
In Sri Lanka exporters are facing difficulties getting empty containers in general and specific types of containers.
Sri Lanka’s import controls had created shortfalls of empty containers, whereas, in the past, there was an excess of boxes on the island.
“Specifically for Sri Lanka, the reduction of imports has had a direct impact on container availability,” Abeysekera said.
“Generally, Sri Lanka has an imbalance in the number of containers with more inflow than outflow. But currently, it is reversed.”
Due to import imbalance, the 20’ equivalent size containers have a better availability compared to 40’ and 45’ containers in Sri Lanka.
But the overall export cost of 2 x 20’ containers instead of a 40’ container is incomparable.
Shippers Innovating
Shippers are taking several measures on their own to mitigate the fallout and maintain the external trade lifelines of the country.
Forecasting volumes to shipping lines and maintaining accuracy is one way to make sure shipments can be made on time.
“Currently, the earlier you could forecast the lines, the better chance for exporters/ importers to obtain space on vessels,” Abeysekera said.
“Presently, forecasting is done as early as and when found weeks ahead by some users. This helps with rates as well.”
The creation of a common container pool without having to look for containers in specific yards would also help, he said.
It is not clear whether an online data-based could be set up for container freight stations to update data daily.
Official Measures
State authorities could also take measures that would help combat the problem.
Sri Lanka has lost a number of ocean services during the congestion that happened during a Covid-19 spike at Colombo Port last year.
Though many lines have returned some are still bypassing Colombo.
“Sri Lanka should market its Colombo port internationally as a port which successfully combats Covid and attract vessels back to its shores which will increase capacity for local importers and exporters,” Abeysekera said.
Attracting new lines to Colombo would also help.
Sri Lanka can also invite shipping lines to use Colombo as their hub in Asia, he said.
Additional ships calling in Colombo will give more business to shipping agents and other service providers including husbandry and ship services.
Sri Lanka however has placed controls on foreign ownership of shipping agencies, which some say has prevented the island from following on the path of Singapore where regional offices are set up.
Fast-tracking clearances by border agencies would also help, he said.
Sri Lanka can also relook at import controls, he said. Ad hoc changes are creating ripples and uncertainties in the market.
While the cost of shipping had hit record levels, shippers have to put up with very high service charges from middlemen such as freight forwarders, consolidators.
He says such gauging is unethical given the current context. (ECONOMYNEXT)
News
Prison officers urge Justice Minister to protect their colleague who opened fire
Prison officers yesterday requested Justice and National Integration Minister Harshana Nanayakkara to protect their colleague who opened fire at the Negombo Prison during Monday’s riot.
They made that request when the Minister visited the Welikada Prison to pay his last respects to seven officers killed by inmates during the clashes. Soon thereafter, the National Hospital reported that another prison officer had succumbed to his injuries.
The Minister was told that the officer had opened fire through a small opening in the main door to prevent the rioting prisoners from escaping.
The Opposition has demanded to know who ordered the prisons officer to fire. The concerned officer’s colleagues told the Minister that had a breakout occurred the inmates would have posed a serious threat to the public.
Altogether, authorities transferred 1,033 inmates from Negombo to other prisons. Among them was Katuwellegama Suresh, who is alleged to have spearheaded Sunday’s attack on a group of prisoners that led to the following day’s clashes.
Executive Director of the Committee for Protecting the Rights of Prisons, Attorney-at-Law Senaka Perera told The Island that some of the transferred inmates had been mercilessly assaulted in other prisons.
Sources familiar with the situation at prisons said that they were able to accommodate between 11,000 to 12,000 inmates but over 40,000, both convicted and suspects were held in the country’s prisons. About 30,000 of them are suspects. Due to severe overcrowding, prison management had been compelled to accommodate both the convicts and suspects at the Negombo Remand Prison, sources said, adding that the clashes had erupted between the two groups.
Those who had been convicted were accused by the other group of passing information to the previous prison management resulting in elimination of narcotics and other banned items in the prison, sources said. They went on the offensive after both the administrator and the second-in-command were transferred separately and the authorities ignored the volatile situation and proceeded with routine work on Monday.
Sources said that the authorities were yet to release the exact number of convicts and suspects killed and wounded during clashes between the two groups and with prison staff. According to the Health and Media Ministry the total number of persons admitted to the National Hospital, following the incidents, were 29. Of them, 14 were inmates. The Ministry said that of the 29, 12 were in the intensive care unit.
Prof. Prathiba Mahanamahewa told The Island that the overcrowding of prisons should be carefully examined, taking into consideration that even some innocent people were held in various prisons. Poisons, Opium and Dangerous Drugs (Amendment) Act of No 41 of 2022 was being exploited and misused by law enforcement authorities to frame and arrest people. In terms of this law, those who had been framed couldn’t secure bail from the High Court but had to seek the intervention of the Court of Appeal. The lawyer explained how Section 54 of the Act was being used indiscriminately against people.
According to Mahanamahewa about 80 percent of those suspects held were on narcotic charges.
By Shamindra Ferdinando
News
Negombo Prison riot: Ensuring protection of prisoners fundamental responsibility of the state – UN
Expressing concern over the death of prisoners, both convicts and suspects, as well as correctional officers, the United Nations Resident Coordinator in Sri Lanka, Marc-André Franche has emphasised that ensuring that protection is a fundamental responsibility of the State.
Twenty prisoners and seven correctional officers were killed in clashes on Sunday and Monday. Over 100 received injuries.
Issuing a statement, the United Nations extended its condolences to the families affected by the tragedy and wished a speedy recovery to those injured.
Underscoring prison officials carried out challenging duties in service of the State, and the general public, the UN Resident Coordinator said that their loss was deeply felt. The UN also stressed that inmates who died, or were injured, were under the care and protection of the State, emphasising that both correctional officers and prisoners require greater protection. Ensuring that protection is a fundamental responsibility of the State, he said.
The UN statement highlighted the urgent need for continued investment and reform within Sri Lanka’s prison system.
It pointed to longstanding challenges, including overcrowding, outdated practices and poor conditions in detention facilities, which remain concerns in prison systems both in Sri Lanka and globally.
The UN said Sri Lanka’s engagement with international human rights standards, relating to the treatment, safety and wellbeing of persons deprived of liberty, provides an important framework for addressing these issues.
The United Nations welcomed the establishment of an independent committee to investigate the circumstances surrounding the prison violence and emphasised that the committee’s findings should lead to concrete and lasting improvements in detention conditions.
The UN also reaffirmed its commitment to supporting Sri Lanka through technical cooperation aimed at improving prison security, strengthening detention conditions, and supporting the welfare of correctional personnel.
News
Govt. considers banning or restricting social media for children under 16: PM
The government was considering imposing restrictions or a possible ban on social media access for children under 16, Prime Minister Harini Amarasuriya told Parliament yesterday (8).
Responding to a question raised by SJB Gampaha District MP Harshana Rajakaruna, the Prime Minister said discussions with relevant stakeholders were currently underway to assess the impact of social media use on children and explore measures to ensure their safety.
She said the consultations, led by the Ministry of Women and Child Affairs, were focussed on the social, mental and health effects of excessive social media use, digital security concerns and global developments in regulating online platforms.
The Prime Minister said the National Child Protection Authority and the National Childcare and Protection Society were also engaged in discussions on the proposal, while steps were being taken to draft national guidelines on restricting access to social media platforms for children below 16 years.
She added that awareness programmes would also be introduced to safeguard children’s mental and physical wellbeing in an increasingly digital environment.
According to the Prime Minister, several government institutions, including the Ministries of Women and Child Affairs, Education, Higher Education and Vocational Education, Health, Mass Media and Digital Economy, along with the Sri Lanka Police, Department of Probation and Child Care Services and the National Child Protection Authority, were collaborating on the initiative.
The PM said the government, together with World Vision, was implementing a programme aimed at addressing mobile phone addiction among children under 18, which had already shown positive results.
Prime Minister Amarasuriya said the government’s focus was to strike a balance between protecting children from potential online harms and ensuring they benefit from digital opportunities.
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