Shipping freight rates fall by 30 per cent amid low oil prices, global recession

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Mushir Ahmed
Shipping companies operating in the country have cut freight rates by at least 30 per cent in the past few weeks amid cooling oil prices and fears of recession in major economies, officials said Thursday.
The companies, who also operate feeder vessels between Chittagong and regional ports of Singapore, Klang, Tenjung Pelepas and Colombo, have abolished the $70 fuel surcharge they imposed early this year due to sky-rocketing oil prices.
"Freight rates are in a free-fall mood," said Captain Rafiqul Islam, general manager of major shipping company, PIL.
"In the last 15 days, freight rates of Europe-bound 40-feet container have declined by $600-$700. On every other major route the situation is the same."
"On an average freight rates in Europe and North America routes have shrank by at least 30 per cent. The rates are declining fast because of sharp fall in freight movement to recession-hit Europe and the United States," he said.
Officials said major shipping company including the world's largest operator Maersk Line --- which controls some 25 per cent of freight moving in and out of Bangladesh ---, APL, NYK and Hapag Lloyd have also made similar cuts.
A cooling export from China and some 60 per cent drop in global oil prices also dragged the shipping freight down from their historic highs in June-September, they said.
A senior Maersk Line official, however, refused to answer queries over telephone.
Companies said after the cut, a 40-feet container bound for Europe is now charged at around $2000 while the rate for a US east coast-bound container has come down to around $2300.
The country's main Chittagong port handled around one million TEUs --- or Twenty Equivalent Unit containers --- in the last fiscal year, with 90 per cent of the outbound cargoes heading to the US and Europe.
Feeder vessels which ply between Chittagong and major ports in the region have, meanwhile, scrapped a $70 oil surcharge they enforced on every 20-feet container moving to and from the country.
Officials said the surcharge was imposed when oil price hit $120 per barrel in the global market early this year, but was dropped this month after the prices declined by at least 60 percent from their record peak.
"The feeder operators imposed the surcharge as a critical bunker recovery (CBR) fees. But all the companies have now scrapped it following oil price fall," said an official, whose company operates six feeder vessels.
The freight rates between Chittagong and Singapore, and ports of Klang and Tenjung Pelepas in Malaysia and Colombo have now eased to around $250 for every 20-feet container.
"Some of the companies are even offering much lower freight rates for shippers who operate in volumes," said the official, speaking on condition of anonymity.
Local shipping company, HRC --- which operates eight container ships--- said it has been charging $220-$250 for every TEU despite the oil shocks.
An analyst said declining freight rates are good news for export competitiveness and fighting inflation at a time when higher prices seemed to have become stubborn.
"Shipping freight cost eats up major part of import cost. A decreasing freight rates would obviously help lessen inflationary pressure," said economist M Asaduzzaman, a former chief of Bangladesh Institute of Development Studies (BIDS).
"But the government has to monitor the prices carefully, because the so-called import cartel may try to cash in on the emerging situation by not passing on the reduced freight rates to their imported items," he said.