Red Sea impasse to push up cost of importers-exporters

Market insiders said the 5,600-kilometre diversion will add two weeks of travel time and increase the cost of shipping goods by over 40 percent.

Dwaipayan Barua

Dwaipayan Barua

The Daily Star


A general view of Chattogram port amid the countrywide blockage. The photo was taken recently. PHOTO: THE DAILY STAR

December 26, 2023

DHAKA – Importers and exporters in Bangladesh started to feel the pinch of the transit disruption through the Red Sea route as major shipping lines announced, and in some cases even began implementing, additional surcharges to cover costs for re-routing their vessels around Africa’s Cape of Good Hope following attacks by the Yemen-based Houthi militant group.

Market insiders said the 5,600-kilometre diversion will add two weeks of travel time and increase the cost of shipping goods by over 40 percent.

Shipping lines have announced the imposition of US$700 to US$1,500 per TEU (twenty-foot equivalent container) to offset additional costs, they said.

Such additional charges will impact to a major portion of Bangladesh’s export trade and a small segment of import trade.

According to shipping executives, over 70 percent of monthly export-laden containers from Bangladesh — bound for ports in the EU, the east coast of the US, and Canada — cross through the Red Sea while 8-10 per cent of the country’s import comes through the route.

Exporters may not be directly affected by this additional freight charge as foreign buyers usually bear the transport cost, but importers will be affected directly.

“Although foreign buyers will bear the additional charges, this will eventually have impact on Bangladeshi exporters,” opined Syed Nazrul Islam, first vice-president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

“As the buyers will pay the additional charges, they may seek discounts or bargain for cheaper rates for the next orders, which will ultimately affect exporters,” said Nazrul.

Mediterranean Shipping Company (MSC), the global leader in container shipping, announced the implementation of a Contingency Adjustment Charge (CAC) of $1000 per 20 feet container and $1,500 for a 40-foot container from January 1 on all shipments from the Indian sub-continent (India, Pakistan, Bangladesh, and Sri Lanka) and the Middle East to European, Scandinavian, Baltic and Mediterranean destinations.

An MSC official said the additional charge would be applicable for new bookings.

AP Moller–Maersk group announced a Transit Disruption Charge (TDS) of $400 per 40-foot container for the route from Far East Asia to North Europe as well as to the east coast of North America.

This TDS is applicable for shipments ‘on the water’, Maersk stated in a customer advisory, adding that it would also charge a Peak Season Surcharge (PSS) of $1000 per 40-foot box for the far-east to North Europe route, to be effective from January 1.

French company CMA CGM imposed a PSS of $500 per TEU from January 1 to all European ports from all Asian ports, including Bangladesh.

Japanese shipping company Ocean Network Express (ONE) announced that they would apply an Emergency PSS of $500 for all container types on the Asia Europe Trade, the liner informed its customers in an update in December, adding that it would be effective as of January 1 and valid until further notice.

Hapag-Lloyd and HMM also announced similar charges.

Several shipping executives said these charges would be applicable for cargoes to and from Bangladesh since export cargoes bound for Europe and the east coast of the US and import cargoes are on the mentioned routes.

They assumed there would be further charges if the situation persists.

Bangladesh Freight Forwarders Association (BAFFA) Vice-President Khairul Alam Suzan said the shipping lines are applying these charges to cover up additional costs, such as increased fuel and operating costs due to the longer route.

Citing the latest development about Maersk’s announcement of resuming Red Sea transit yesterday, Suzan hoped that the situation may improve soon.

However, a shipping official, preferring anonymity, said the situation would not be as bad as it was during the Covid-19 pandemic, when container freight charges skyrocketed up to $20,000 as most global ports remained non-operational.

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