Exporters in quandary as rupee appreciates, freight rates high

Freight rates have to some extent stabilised if only marginally with the coming of the Chinese New Year however, Sri Lankan exporters are still facing issues with the rupee appreciating as a result of which there could be a drop in export volumes.

National Chamber of Exporters President Jayantha Karunaratne told the Business Times that there was only a marginal drop in freight rates but that most destinations are still holding onto earlier rates and they continue to be very high.

It was pointed out that another key concern for exporters is the 14 per cent year on year appreciation of the rupee which is clearly to the disadvantage of the exporters.

Sri Lanka’s rupee closed at 313.70/90 to the US dollar on Thursday from Rs.313.00/10 on Wednesday.

He noted that most markets are trying to buy at lower than last prices and buyers are not willing to absorb the increased costs.

And since exporters are facing a difficult situation where they are unable to reduce the costs there could be a lowering of cargo shipments from Colombo.

Some reports have stated that while rate levels have softened on the Far East trade from January however, this was not by any significant quantum (US$50-$100). Carriers are likely to assess their booking pipeline post the Chinese New Year period before deciding on further rate reductions but it is expected that rate levels are likely to soften into March.

Shippers’ Academy CEO Rohan Masakorala said that last week freight rates had stabilised at higher levels and that rates that had increased by about 40 per cent were seen to be on a downward move.

He noted that delays are going to cause problems in inventories and most shipping lines pass the cost onto the customers as costs increase.

In the meantime, he noted that Colombo is booming due to ships discharging in Colombo and re-routing to other feeder ports as it is the last port of call from Asia.

Mr. Masakorala noted that new clients have now come requesting for services at the Colombo Port as a result delays are taking place. Berths and facilities are prioritised based on the usual customers to Colombo as opposed to new ones.

He also pointed out that Colombo is short of capacity and it is expected that the growing capacity at the port is likely to help with the increased traffic.