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