Colombo port congestion comes as fresh supply chain woe

Worsening congestion at Colombo Port, fuelled by disrupted truckload services there, threatens to unleash a fresh wave of supply chain shocks to Bangladesh's export-import trade.

Traders and logistics service providers have said it usually takes eight days for exported goods shipped from Chattogram to reach Colombo and be loaded into a mother vessel there, but completing the task is currently taking three days more because of the serious container build-up at Colombo – the key transshipment hub for South Asia.

This extra time in the shipment of goods has made the exporters unsure of timely delivery of products to their foreign buyers. Shipping lines, meanwhile, are worried that the new crisis will cause financial losses for them as their ships are having to spend idle time at the port.

Freight charges have already increased by 4 to 5 times because of the Covid-19-induced supply chain disruptions which have taken a fresh blow from the Ukraine war. And Colombo Port congestion will only exacerbate these crises, they have said.

Ajmer Hossain Chowdhury, head of operations and logistics at Mediterranean Shipping Company (MSC), told The Business Standard that the crisis at the Sri Lankan port has been persisting for the past one month.

In the beginning, it took one day more, which has now risen to three days, he mentioned, adding many lorry workers are abstaining from work demanding more wages. Besides, large-scale fuel stock-outs in the island nation are another reason for the latest prime mover shortage at the port, he continued.

"Previously, more than 400 prime movers/lorries used to handle containers at the port, but the number now stands at 200. This crisis of prime movers is causing a spike in the time needed for loading the export-import containers into mother vessels after they are unloaded from feeder vessels."

Infographic: TBS

Container movement to and from Bangladesh is historically relayed over various transshipment hubs such as Colombo, Singapore, and Port Klang and Tanjung Pelepas in Malaysia, as ships having a draft of over 9.5 metres cannot enter the Chattogram port.

Syed Mohammad Arif, chairman of the Bangladesh Shipping Agents Association, said about 60% of Bangladesh's imports are transported to Chattogram port via the port of Singapore. Colombo Port accounts for 30% of such shipments while the remaining 10% are done through Malaysia's Port Klang and other ports.

On the other hand, 40% of Bangladesh's export trade is carried out using the Chattogram-Colombo route, 40% through Singapore, and the remaining 20% is done through the ports of Klang, Tanjung Pelepas, and others, he maintained.

Exported goods shipped using the Colombo Port reach buyers in Europe 3-4 days earlier when compared to those shipped using other transshipment ports, he pointed out, adding exporters in Bangladesh, therefore, are more inclined to using Colombo Port for exporting goods to Europe.

Sector insiders told TBS that shipping fares on the route with Europe and America surged as high as five times because of the pandemic-induced shortages of ships and containers. The fare of a US-bound container was $3,000 before the outbreak of the pandemic, which surged 500% to $18,000 amid the pandemic peak, while the fare on an EU-bound container increased 400% to $12,500 from $2,500. The situation is still almost the same.

In addition, about 25,000 containers of Bangladeshi importers were stranded on the sea because of congestion in the transshipment ports of Sri Lanka, Malaysia, and Singapore.

Anis Ud Daula, executive director at HR Lines Ltd, an affiliate of the Karnaphuli Group, said, "Four out of our six container vessels operate on the Chattogram-Colombo route. The other two vessels operate on the Klang and Singapore routes.

"The congestion at Colombo port is hurting timely delivery of goods. Earlier, goods could be loaded into mother vessels soon after they reached the port. Now it takes three days of extra time. The congestion has also created a risk of missing the mother vessels. A one-day idle stay of a ship on the sea makes her owner face a loss of about $20,000."

Syed Nazrul Islam, first vice-president of the BGMEA, told TBS the garment industry will find it difficult to deliver goods to their foreign buyers on time if the congestion at Colombo port worsens further.

Asked whether the fresh spell of lockdown put in force in China has disrupted the supply chain on sea routes, Nazrul said it would certainly leave an adverse impact if the lockdown continues for a long period of time.

Is there any way out?

Md Ashikur Rahman (Tuhin), managing director at TAD Group, said, "Introducing direct vessels to EU-based ports could be a sustainable solution to the unwanted situations caused by congestion and other problems at the transshipment ports. Such direct shipping services also may help to bring down the freight cost to half the current level."

Bangladesh needs a number of large-sized direct vessels to make export-import trades smoother, he added.

He, however, mentioned that businesses will have to wait for the Bay Terminal to become operational as the current depths of the country's ports do not allow large vessels.

Recently, Italian freight forwarder company Rif Line and its subsidiary Kalypso Compagnia di Navigazione have introduced a direct vessel service from Chattogram to Europe with two vessels: Songa Cheetah and Cape Flores.

Business leaders told TBS that after the introduction of the direct shipping line, a number of local companies have already started discussions with international shipping companies to launch charter ships for direct operations with European ports.

The managing director of a logistics company, seeking anonymity, told TBS that his company is in negotiation to introduce a direct vessel service between the ports of Chattogram and Hamburg.

Bangladesh-Europe direct shipping

The Cape Flores arrived at Chattogram Port on 24 December last with empty containers but did not carry any exports on their way back to Europe.

On the other hand, Songa Cheetah started to journey between Chattogram Port and the Port of Ravenna in Italy on 7 February this year.

About 98% of the export products on Songa Cheetah were readymade garments and the remaining 2% were handicrafts, leather, and jute products.

This initiative was able to reduce transportation time by around 24 days and save freight costs by 40%.

This was the first time a ship directly carries goods from Chattogram Port to a European port, taking only 16 days, usually, such goods take about 40 days to reach that port through a transshipment port.

"Considering the importance of garment exports, Chattogram Port Authority will prioritise ships on the Italy-Bangladesh route in providing facilities, including berthing and key gantry crane," said Rear Admiral M Shahjahan, chairman of the Chattogram Port

Authority, at the inauguration of the Bangladesh-Italy direct route.

"The direct shipping route has started a landmark chapter in our economy. If other shipping lines want to launch such a direct route, the port authorities will extend all possible cooperation," he added.