Hopeful that issue will be resolved by first half of 2022
There has been a rise in the shipping costs due to tremendous delays at ports while coronavirus infections continue to impact supply chains. This could be a major blow for small exporters for whom the logistics costs could be a crucial factor when deciding about whether, or not, to trade. Fibre2Fashion spoke to cross section of the textile industry to get an idea about when the shipping prices are expected to stabilise.
Cem Altan: We must separate the incidental from the structural. Currently, the sky-high shipping prices and also some labour shortages have been sparked by a supply-demand imbalance. With the COVID-19 situation still causing major uncertainties about restrictions to business, we will face some yoyoing of demand and therefore continuing imbalances. Structurally, in the shipping industry we face a situation where a few major shipping companies have a de facto global oligopoly and perhaps when shipping prices remain structurally high, this is a moment for industries that rely on global supply chains to challenge this situation.
Faruque Hassan: It’s difficult for us to predict but it may not happen even in the year 2022. The global freight system has apparently lost its rhythm which will take time to get back.
Dr A Sakthivel: In 2021, we saw severe logistics challenges as the prevailing system of buyback by shipping companies traveling from Asia to Europe did not happen. With the majority of EU ports closed, the vessels had to return empty, after delivering goods at these ports, leading to escalation in freight cost. However, this challenge has been universal and just not limited to India. In fact, Chinese logistic costs are estimated to have increased three times during this period. It has been predicted by the logistics companies that the situation will stabilise by March 2022. The Department of Logistics, Government of India, along with the stakeholders has been holding regular meetings to resolve the issue. We are hopeful that the issue will be resolved by the first half of 2022.
A Sukumaran: Maritime freight rates had been on an upward trend since the second half of 2020. As of September 2021, rates had increased by 292 per cent year-on-year. Sadly, we don’t see any signs of this being reversed even next year. On average, Sri Lanka had 200 ships on a monthly basis, and a further 78 flights and freighter operations moving in and out of the country on a weekly basis.
Dr. Christian Schindler: The logistical problems will remain a headache as long as the global economy is overheated as it was for the most part in 2021. Since the extraordinary expansive fiscal policy has come to an end and also the expansive monetary policy is reversed cautiously, global demand will grow slower, which should help to bring demand and supply back into balance. In the 11th ITMF Corona-Survey in November 2021, practically all segments of the textile value chain expected good business in the first half of 2022.
Mohammad Ali Khokon: Shipping lines have also become victims of the pandemic causing major cargo congestion. Before COVID-19, the situation was different. Post lifting of lockdowns, people are buying more goods which have increased the demand leading to a shortage of containers. When the world started getting back to normal and opened the borders, demand for raw materials and other products surged which led to this crisis. Our shipping lines do not have the capacity to handle the extra load. Our government and the port authorities should make long term plans taking the pandemic scenario into consideration. The infrastructure of the ports should be upgraded as well.
Frédéric Van Houte: On the challenges of shipping industry, an improvement might be expected from the middle of 2022.
Published on: 03/01/2022
DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.
