By Imesh Ranasinghe
Shipping agents in Sri Lanka are under “stress” over the dollar payments owed to shipping lines, while exporters see some level of stabilisation in freight charges.
Speaking at an event held yesterday (1) by the Colombo Stock Exchange (CSE) with the participation of top blue chip companies in Sri Lanka, Hayleys PLC Head of Strategic Business Development Lasantha Somaratne said that due to the dollar liquidity shortages, the resulting pending payments due to shipping lines have created a “sort of stress in the market”.
“We are doing what we can do; we are continuing to engage with our principals. We explain to them the status, and tell them to look at the big picture, which is that Sri Lanka is strategically located at the edge of South Asia, which has 25% of the global population,” he added.
A media report in March 2022 revealed that shipping agents have dues amounting to around $ 100 million in payments to their principals, although the shipping agents started asking for payments from exporters in dollars as early as January 2022.
Moreover, speaking at the event, Expolanka Holdings PLC Head of Strategic Planning and Business Development Shiraz Imamudeen said that freight rates have been stabilised to some extent from the peaks seen in December 2021. However, he noted, rates are still at elevated levels, adding that these depend on both demand factors and supply factors.
Container freight rates increased dramatically between January 2019 and April 2022. The year 2021 saw an especially steep increase in global freight rates, reaching a record price of nearly $ 10,400 in September 2021.
In April 2022, the global freight rate index stood at about $ 7,800, and as of yesterday, it was at $ 7,851, prior to the pandemic it was at around the $ 2,000 mark.
“There is a stabilisation of demand to some extent in terms of the largest market, which is the US. But still, on the supply side, it’s not at the optimum level. So there are two pulls in two different directions,” Imamudeen said.
He also noted that geopolitical tensions and oil price increases also played a part in freight charges.
“So it’s difficult to predict which way it will move,” he added.
According to SHIPHUB, a media outlet that covers logistics, freight, and transportation sectors, it is estimated that freight rates will be corrected and will drop by 30-40% in 2022.
The fact that freight rates are to drop is good news, especially for importers. However, it is highly unlikely that they will drop back to the 2019 levels, according to SHIPHUB.