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Thursday December 1st, 2022

Sri Lanka exporters braced for delays, higher freight rates from Suez Canal shock

STUCK FAST: Ever Given, a 22,000 TEU container carrier on charter to Evergreen line ran aground on the Suez Canal on March 23. There are fears that it will be at least next Wednesday before it is re-floated.

ECONOMYNEXT – Sri Lanka’s exporters and importers are braced for a spike in already high freight rates and delays amid rising fears that Suez Canal will be closed until next week as frantic efforts are made to dislodge a massive container ship that has run aground in the vital waterway.

Over 200 vessels, made up of bulk carriers, container vessels, crude and gas carriers are have piled up on both sides of the canal since Ever Given, a 20,000 TEU container vessel ran aground blocking the Suez Canal on March 23.

Over 12 percent of the global trade is estimated to move through the Canal and most of Sri Lanka’s exports to Western Europe and the US East Coast.

Related

Sri Lanka exports and imports could be disrupted if Suez canal remains blocked

Suez canal shipping suspended amid efforts to re-float grounded Evergreen vessel

Ripple Effect

“We feel that there will be a ripple effect of the blockage in Suez on exports out of Sri Lanka,” Suren Abeysekera, Chairman of Sri Lanka’s Shippers Council, which represents exporters and importers, said.

“Our only form of quick movement out of Asia is Suez so I think roughly 50 ships pass on a daily basis but for two days everything is on hold now,

“So it will not help up with exporting to Europe and the US east coast and also the raw materials that come in through that route will have definite delays and also the empty containers that come back to Asia that will also impact more.”

Some of the raw materials for exports come from Asia, which may not be affected.

Rehan Lakhany, Chairman of Original Apparel exporters said the effect could be “devastating” if the crises is extended.

“Hopefully if the vessel is moved in the next couple of days, we won’t see a serious impact, if it takes longer then it will be devastating,” Lakhany said.

“If there is an impact then it will make our exports expensive. If the retailers are not able to put the styles up on time, they will have to fill the empty shelves with alternate products or will have to look at optional air freight and air freight at the moment is very expensive.”

The Suez problem came just as Sri Lanka’s exports recovered to grow 2.5 percent from a year earlier in February 2021, after falling 9 percent in January.

Related Sri Lanka exports up 2.5-pct in February, EU shipments surge in 2021

Freight Rates

Freight rates which had rocketed over 300 to 400 percent during the Coronavirus crisis in 2020 had started to move up to new highs over due to the crisis, according to reports.

In the apparel trade, buyers take care of the shipping, he said. However importers will have to bear the cost.

Reports said it may take as long as next Wednesday to move the Evergreen line vessel whose bow is stuck fast on a sand bank on the side of the Suez Canal. Dredgers are already at work, shifting the sand.

If the cargo has to be moved to lighten the ship, heavy lift helicopters may have be used, taking more time, salvage experts have said.

“Global supply chains are already affected, turnarounds are delayed and congestion is building up,” Rohan Masakorale, head of Sri Lanka’s Shippers’ Academy sad.

“It is not only containers but bulk cargo and crude,” he said. “Deliveries to refineries are delayed and there is already a rise in fuel prices.”

Each day, around 50 to 75 ships pass through the Suez Canal.

The Suez Canal Authority said on February 06, the highest recorded in 150 years passed of 5.8 million tonnes passed through the canal.

Among 35 vessels in the South Convoy larges was the 222,000 Ever Genius, on the way from Sri Lanka to the Netherlands. On the 40 vessel Northern Convoy the 193,000 tonne CSCL Pacific Ocean from UK to Malaysia was the largest vessel. (Colombo/Mar26/2021)

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Sri Lanka China-backed port to welcome second cruise ship

ECONOMYNEXT – Sri Lanka’s China-backed Hambantota Port said it was getting ready to welcome MV Azamara Quest, a cruise ship, as another passenger vessel departed.

Mein Schiff 5, operated by TUI had departed Hambantota International Port for Pulau Penang Island, Malaysia on November.

“As well as being her maiden call at the port, Mein Schiff 5 is the first passenger cruise ship to call at the port since the pandemic began,” said Johnson Liu, CEO of Hambantota International Port Group (HIPG) said in a statement.

“It was undoubtedly a great boost for the tourist economy in the south when the vessel called at the Hambantota International Port.”

Mein Schiff 5’s passengers had also visited the Bundala National Park, Hambantota Botanical Gardens, Galle and Kataragama.

Passengers had explored Hambantota by tuk-tuk, while others had enjoyed the beaches in the Shangri La Hotel, the port said.

MV Azamara Quest will arrive in Hambanota on on December 05. (Colombo/Dec01/2022)

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Sri Lanka’s shares gain in mid market trade

EXONOMYNEXT- Sri Lanka’s shares gained in mid market trade on Thursday (1), pushed up by strong positive sentiments on interest rates easing in line with inflation and speculation on government to hold talks with multilateral creditors ADB and World Bank for a possible loan facility.

Market has continued to gain for the past four sessions.

“Shares were moving on positive strong sentiments flowing in from yesterday (30), we are seeing a rally in the hotels, while the retail favorites such as LIOC and Expolanka,” analysts said.

Positive investor sentiments have been established, from positive comments from the Governor of the Central Bank over market rates eventually seeing an ease despite the fears of a domestic debt restructuring as inflation falls, increased liquidity in dollar markets, and the inter-bank liquidity improves.

Analysts further stated that, Treasury related stocks are also activated due to downward movements in yield.

All Share Price Index (ASPI) gained by 1.4 percent or 123.41 points to 8,774.64, while the most liquid share gained by 1.31% or 35.68 points to 2,765.

The market generated a turnover of 1.6 billion rupees at 1130 hours. (Colombo/Dec1/2022)

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Sri Lanka electricity losses from overpriced fuel, no tariff hike considered: regulator

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Electricity Board’s high operating costs are partly due to excessive prices paid for fuel and no tariff hike is being considered, Chairman of the Public Utilities Commission of Sri Lanka, Janaka Ratnayake said.

The CEB itself does not buy fuel but depends on state-run Ceylon Petroleum Corporation and Lanka Coal, another state firm to buy fuel. Both firms are periodically caught in procurement scandals.

“They are paying about 385 plus rupees per litre for furnace oil,” Ratnayaka told EconomyNext.

“That is too much. From the global market we can buy it to much lower price. It can be imported below 200 rupees,”

“I ask the government to take the necessary steps to create a system to import furnace oil, like they did for fuel, to be imported at the lower price levels. If that happens, we can go without going for a price hike.”

Sri Lanka’s CEB generally gets furnace oil and residual oil from the domestic refinery and usually do not import furnace oil.

The refinery however is not regularly operating due to inability to get crude amidst the worst currency crisis in the history of the island’s intermediate regime central bank.

Ratnayake had earlier brought to light import costs of the CPC.

Pushing for operations efficiency of the CEB is a role of the regulator. Regulating costs based on global benchmark prices to push for procurement efficiencies is a standard practice. However the PUCSL is not the official regulator of the petroleum sector.

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Sri Lanka power tariff revisions sought in Jan and July: Minister

Power and Energy Minister Kanchana Wijesekera told parliament that cabinet approval was sought to twice yearly tariff hikes in January and July of each year.

No Electricity tariff hikes are being considered yet, Ratnayake said.

Wijesekera blamed the regulator as well as successive administrations for not regularly revising power prices and pushing the sector into crisis.

In Sri Lanka activists had also blocked cheap coal power. (Colombo/Dec01/2022)

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