Textiles traders face Bangladesh freight congestion

4/24/2017

Bangladesh, a global hub for the textile trade, has been suffering from serious air and ocean freight congestion, with leading forwarders expecting things to get worse before they improve.

Forwarders have told Lloyd’s Loading List that importers of garments and textiles from Bangladesh continue to be thwarted by port and airport congestion that is driving up supply chain costs. Bangladesh saw export earnings rise 4% to US$25.94 billion in the July-March period of the current fiscal year, supported by 10% year-on-year export growth in March that was largely attributed to shipments of apparel, a major component of the country’s economic health.

Nooruddin Chowdhury, Bangladesh country manager at DHL Global Forwarding, told Lloyd’s Loading List that economic growth in the country had been underpinned by the expansion of its textiles and readymade garments industry. “Around 82% of Bangladeshi exports are dependent on textile products,” he said.

But transport capacity has not kept pace with the growth of the sector. Forwarders noted a major surge in demand in March from Bangladesh saw air freight rates soar. “We’ve seen a high single digit increase in rates and pre-booking times are now pushing a week,” one source told Lloyd’s Loading List last week.

“The airports in Bangladesh are facing space shortage for import and export goods, resulting in congestion, overflow and capacity issues at the airports,” added Chowdhury. “This has contributed to delayed shipments entering and exiting the country. Besides space constraints, there is also insufficient cargo handling equipment and resources to manage the increasing volumes in Bangladesh.”

He said Biman Bangladesh Airlines’ management and local civil aviation authorities were now trying to expand its cargo handling areas to cope with the current capacity issues and there were also plans to build a new import warehouse on the northern side of the Biman Cargo Village. “These will help to alleviate the congestion and capacity issues currently faced,” he said.

The key gateway port of Chittagong is also proving a bottleneck for the apparel industry. The port has a shallow draft, which limits vessel capacity, and has suffered from congestion for much of the last year, hitting textile producers bringing in raw materials from Asia and exporting finished products to Europe and North America.

Chowdhury said berthing delay at Chittagong had decreased from 5 - 6 days during June to December 2016, to 1 – 2 days as of March 2017 due to lower import levels. “However, we expect berthing delays during the peak period – from May to November – to be around 5 days, which could increase to 7 or 8 days during the post Eid-ul-Fitre and Eid-ul-Azha periods in late June and late August/early September, respectively, as the ports will be closed during the major holidays in Bangladesh,” he added.

Shippers will also likely be affected by the network reorganisation of the container shipping consortium The Alliance. “The apparel industry in the UK currently relies on rapid imports with short lead times from Bangladesh,” said investment analyst Stifel. “One of three new mega-alliances announced it will only have one scheduled service, with a 25-day transit time, from that part of Asia, so they (Bangladesh apparel shippers) can’t use that alliance.”

Chowdhury said local authorities were desperately pushing forward with a number of new projects that would boost capacity in the coming years.

“The current situation has resulted in delayed shipments for importers of more than a week,” he added. “This is exacerbated by the decreasing capacity for ocean freight brought about by the recent Hanjin insolvency and mergers in the shipping industry where rates are now on the rise.