Soaring freight costs are hitting Bangladesh’s exports to the US, as manufacturers face a triple threat of high shipping rates, rising raw material prices, and costly bank financing. The ongoing Middle East conflict adds uncertainty, with buyers delaying orders and production. This situation is exacerbated by the fact that some buyers are splitting orders or delaying production, leaving manufacturers with idle capacity and mounting investment costs. The conflict has made it difficult to predict shipping costs, production schedules, and order flows, with exporters hoping for a resolution to stabilize freight rates and restore buyer confidence.
Exporters report that shipping charges now rival or exceed product prices, making it difficult to compete. Freight rates to the US are particularly steep compared to Europe. A 20-foot container from Chattogram to New York costs up to $11,800, while a 40-foot container can reach $12,900. In contrast, a 20-foot container to Hamburg or Rotterdam is $3,000, with a 40-foot container to major European ports costing $4,586. These disparities highlight the challenges faced by exporters in maintaining competitiveness in the US market.
Shipping Costs Outpace Product Prices
Kutubuddin Ahmed, founder-chairman of Envoy Textiles, notes that higher freight charges compound production costs. Exporters also pay more for imported raw materials, creating a dual pressure that undermines competitiveness. Bangladesh’s heavy reliance on imported inputs further complicates cost reduction efforts. Buyers, however, resist absorbing these higher costs, leaving exporters in a precarious position. Ahmed emphasizes that the combined pressure from shipping and raw material costs is eroding the country’s export competitiveness.
Syed Nasir, managing director of Xclusive Can Ltd, reports that a US buyer delayed production due to cost pressures, with no clear timeline for resumption. This uncertainty disrupts planning, as factories manage operations and procure inputs without clear order timelines.
Production Disruptions and Financial Strain
Saiful Hasan, deputy manager of Akij Plastics Ltd, describes how a US buyer’s caution disrupted their production flow. Both parties had invested in a new line, but the buyer’s hesitation leaves them bearing high interest costs. The slowdown in orders creates a double burden, tying up production capacity while financing costs continue to accumulate. Hasan notes that this situation is particularly challenging for businesses that have made significant investments in anticipation of increased orders.
Volatile Freight Costs and Global Pressures
Mahbubul Anam, former president of the Bangladesh Freight Forwarders Association, points out that freight costs are inherently volatile, rising sharply with disruptions. A container that previously cost $4,000 now costs more than $11,000. Higher fuel prices further drive up global transportation costs, adding to the financial strain on exporters. The situation puts additional pressure on exporters already struggling with weak demand, rising input prices, and expensive bank financing.
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