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.
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.
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.
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 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.
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)
SF claims thousands of police and military personnel leaving
By Saman Indrajith
Thousands of police and military personnel had left the services recently as they did not want to carry out illegal orders, Field Marshal Sarath Fonseka told Parliament yesterday. According to the war-winning army commander 200 policemen have resigned during the past two months and 25,000 soldiers have left the army during the last two years.
“We urged the law enforcement and military officials not to follow illegal orders. We will reinstate them with back pay,” he said.
Fonseka also urged the President and the government MPs not to take people for fools.
“Sri Lanka owes 55 billion dollars to the world. Ranil’s plan is to borrow another seven billion during the next four years. So, in four years we will owe 62 billion to the world.
Ranil and his ministers ask us what the alternative to borrowing is. These are the people who destroyed the economy and society. They must leave. Then, we will find an alternative and develop the country,” he said, adding that the IMF loans had made crises in other nations worse.
“Ranil says that by 2025, we will have a budget surplus as in Japan, Germany and South Korea. These countries are economic power houses, and this comparison is ludicrous.”
CEB hit by exodus of technical staff
By Shiran Ranasinghe
At least five technical personnel of the Ceylon Electricity Board (CEB) resigned daily for overseas employment, a senior CEB official said.They included electrical engineers, electricians and foremen, he added.
“Most of them are quitting due to the economic crisis while others are simply disillusioned. Trained and experienced technical staff are in high demand in many countries,” he said.
CEB United Trade Union Alliance President Ranjan Jayalal said that the CEB had lost about 2,000 employees in recent times due to the above reasons.
“We had about 24,000 such personnel a few months ago. Now the number has come down to 22,000. A number of people had to retire on 31 December, 2022.
Sajith questions sudden decision to charge Rs. 225,000 from students following NDES
By Saman Indrajith
The government had decided to charge Rs 225,000 from those enrolling at the Institute of Engineering Technology, Katunayake under the National Apprentice and Industrial Training Authority (NAITA), Opposition Leader Sajith Premadasa said yesterday in Parliament.
Premadasa said that the institute awards the National Diploma in Engineering Sciences (NDES) and no fee was charged from students until 2023.The IET awards the National Diploma in Engineering Sciences under the three major fields of civil, electrical and mechanical engineering, and eight sub-fields.
“This is an institute that has created over ten thousand tier two engineers. NDES is a four year programme,” he said.
The opposition leader said that the sudden decision to charge 225,000 rupees from students at a time when the average Sri Lankan family is facing significant economic challenges is unfair.
“This institute offered free tuition. We should continue this tradition. A large number of engineers are leaving the country and we need to ensure that we have a continuous supply of engineers to ensure we can maintain our essential technical services,” he said.
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