News / Bangladesh shippers fear rising freight rates will hit demand

© Rehman Asad

Bangladeshi shippers fear catastrophe from a 100% freight rate hike within just a month.

Data shows freight rates between Chittagong and China has increased by nearly 100%, while Bangladesh to Singapore  has risen some 50%, and towards Colombo by about 15% since early May, causing severe hardship for shippers.

China is the top supplier of raw materials to Bangladesh, which exports goods to markets in the US and the EU using transhipment ports, mainly in Singapore and Colombo.

The spot rate on Chittagong-China has shot up to $1,500 per teu, while Chittagong-Singapore is $300 per teu. Chittagong-Colombo is now $230 per teu, according to stakeholders.

“The freight rate has increased significantly due to severe congestions in Singapore,” said Syed Iqbal Ali Shimul, senior vice-chair of the Bangladesh Shipping Agents’ Association.

However, he also suggested a monopoly by local players was behind the recent freight rate hike.

Shipping companies, however, blame the Red Sea crisis, which has added two extra weeks to journey times.

Importers now fear further inflation in a Bangladesh market already-heated because of the rate rise. Exporters fear that western buyers of Bangladesh apparel may try to lower the price they pay to exporters because of the freight rates.

Syed Nazrul Islam, first VP of the Bangladesh Garment Manufacturers and Exporters Association, said the rise could cause buyers to adjust their sourcing costs.

“If carrying costs go up, buyers prefer to go for alternative sources to cut costs,” he said.

Mr Islam said buyers always calculated lead time and cost while selecting a sourcing point.

“When freight rates go up, ultimately manufacturers suffer,” he said. “Cost is cost, and when it goes up the businesses pay.”