Container Transportation costs between Bangladesh and the US-Europe up 100pc in one year
Transportation costs for each TEU container by sea between Bangladesh and the US-Europe have shot up over US$ 200, or over100 percent, in the past one year in the wake of soaring oil prices on international markets.
Traders have attributed the additional costs only to bunker adjustment factor (BAF). BAF refers to floating part of sea freight charges that represents additions due to oil prices.
Usually BAF charges are determined by carriers to be applicable for a certain period on a certain trade route.
BAF charges for Bangladesh were fixed at US$ 460 per TEU (twenty equivalent unit container) for the month of August this year against only $ 225 a year ago.
The BAF rate for per TEU container was $180 in January 2007 and the rate jumped to $ 335 in January 2008, according to the IBPCC (India Bangladesh Pakistan Ceylon Conference), which sets BAF for South Asian region.
On Wednesday on New York's main oil contract, light sweet crude for August delivery, won 1.60 dollars to 137.64 dollars, while London's Brent North Sea oil for August delivery jumped 1.88 dollars to 138.30 dollars a barrel in electronic deals, according to wire services.
In January this year, oil price was $99.62 a barrel.
The high BAF cost is taking toll on competitiveness of Bangladesh's exports, which include garment, shrimp and leather goods.
“Our garment industry with lower profit margins is suffering from high BAF charges,” said Abdus Salam Murshedy, managing director of Envoy Group.
Ahsanul Alam, managing director of a shrimp exporting company, said buyers in the US are not ready to share the additional costs since contracts were signed a year ago on a cost, insurance, freight (CIF) basis, meaning all costs will be paid by the shipper.
"Some companies have freight on board (FOB) contracts for exports, which will not be affected," he added.
"We have to cut production cost and make some compromises in packaging. Some long-time buyers, however, are willing to share a small portion of the increased costs," said Anisur Rahman Milon, managing director of Milon Footwear Limited.
However, ocean freight rate, excluding BAF charges, did not increase much compared to BAF rates. The rate for the US is now $1,900 against $1730 a year ago, while the rate for Europe is $1,650 against $1520 a year ago.
Container handling at Bangladesh's main Chittagong Port rose by nearly 15 percent in the first five months of 2008, port officials said.
The port handled 435,157 TEUs from January to May, against 378,632 TEUs in the same period in 2007, they said.
Traders have attributed the additional costs only to bunker adjustment factor (BAF). BAF refers to floating part of sea freight charges that represents additions due to oil prices.
Usually BAF charges are determined by carriers to be applicable for a certain period on a certain trade route.
BAF charges for Bangladesh were fixed at US$ 460 per TEU (twenty equivalent unit container) for the month of August this year against only $ 225 a year ago.
The BAF rate for per TEU container was $180 in January 2007 and the rate jumped to $ 335 in January 2008, according to the IBPCC (India Bangladesh Pakistan Ceylon Conference), which sets BAF for South Asian region.
On Wednesday on New York's main oil contract, light sweet crude for August delivery, won 1.60 dollars to 137.64 dollars, while London's Brent North Sea oil for August delivery jumped 1.88 dollars to 138.30 dollars a barrel in electronic deals, according to wire services.
In January this year, oil price was $99.62 a barrel.
The high BAF cost is taking toll on competitiveness of Bangladesh's exports, which include garment, shrimp and leather goods.
“Our garment industry with lower profit margins is suffering from high BAF charges,” said Abdus Salam Murshedy, managing director of Envoy Group.
Ahsanul Alam, managing director of a shrimp exporting company, said buyers in the US are not ready to share the additional costs since contracts were signed a year ago on a cost, insurance, freight (CIF) basis, meaning all costs will be paid by the shipper.
"Some companies have freight on board (FOB) contracts for exports, which will not be affected," he added.
"We have to cut production cost and make some compromises in packaging. Some long-time buyers, however, are willing to share a small portion of the increased costs," said Anisur Rahman Milon, managing director of Milon Footwear Limited.
However, ocean freight rate, excluding BAF charges, did not increase much compared to BAF rates. The rate for the US is now $1,900 against $1730 a year ago, while the rate for Europe is $1,650 against $1520 a year ago.
Container handling at Bangladesh's main Chittagong Port rose by nearly 15 percent in the first five months of 2008, port officials said.
The port handled 435,157 TEUs from January to May, against 378,632 TEUs in the same period in 2007, they said.