The distance from Chittagong port to the Red Sea is 5 thousand 493 km. The lead time for Bangladeshi garment products to go to Europe by ship on this route is 30 days in usual times. Now it takes 45 days, which means an additional 15 days.
This is happening for the Houthi rebels. The Houthis, an armed group in the Middle Eastern country of Yemen, have been targeting ships in the Red Sea, posing a threat. Commercial ships with cargo have to change the route and take alternative routes to reach the destination to avoid this risk. The cost of sea transport has increased by at least 30 percent due to the increase in shipment time or lead time for Bangladeshi garment owners. The Houthi rebels have created a new crisis in the garment industry. Buyers are now putting pressure on garment owners to offer discounts to cover the additional costs. Garment owners in the country are worried about the safe arrival of their shipments to their destination in this emerging situation.
Garment exporters say that the garment sector is already going through a difficult time due to various reasons, including the gas and electricity crisis in the country, the increase in loan interest rates, and the reduction of cash assistance in exports. He has been joined by the Houthi rebels like a thorn in the side. Due to all this, a new crisis has been created in the garment industry, the largest sector of the country's export income.
The Houthi rebels are an armed group in the Middle Eastern country of Yemen. The Houthis have been targeting commercial ships, especially Israeli ships, in the Red Sea since last November in protest of the indiscriminate attack by Israeli forces on Gaza, Palestine. As a result, shipping traffic has decreased, increasing the risk of that important route by sea. Europe is currently the biggest market for Bangladesh's garment industry. 58 percent of total exports go to that market.
When contacted, Anwar-ul-Alam Chowdhury Parvez, the former president of BGMEA, an organization of garment exporters, told Khaborer Kagoj, "The main problem is that the lead time for garment products from Bangladesh to reach the destination has increased. The Houthis pose a risk due to attacks on ships sailing in the Red Sea. Ships change routes and take alternative routes to destinations. This makes the shipment take longer to arrive. As a result, costs have increased. Apart from that, some risks have also been created by the incident. Given this situation, uncertainty has been created in the garment industry. It's a matter of concern."
According to sources related to the garment industry, the prices of goods have increased due to high inflation in many European countries, including the US. As a result, the purchasing power of the people in those countries has decreased more than before. Therefore, it is not possible to increase the price of clothes suddenly, if desired. The Red Sea is one of the world's shipping lines. This route accounts for 12% of global trade.
"Freight costs have increased due to Houthi rebels. The lead time for shipments has also increased. The shipment is taking longer because of it. This will have a big impact on orders in the next two quarters. In the meantime, the purchase orders have decreased by 20 percent. The crisis in the Red Sea is a big problem for us. It will affect our country in a big way, said Shovon Islam, managing director of Sparrow Group, an organization of garment exporters.
It has been reported that insurance companies have increased their premium charges by 3 to 5 times due to increased risks in cargo transportation in the Red Sea. This is another reason for the cost increase. It should be noted that taking insurance risks is mandatory for the export of goods.
"The cost has increased, but we have a weakness in our negotiations with the buyers. Buyers take advantage of this poor negotiation. They want to impose additional costs on us. But buyers cannot impose additional costs in countries like China. The marketing policy of China is stronger than ours," said Fazle Shamim Ehsan, vice president of BKMEA.
Cargo shipment by air is an alternative to reducing lead time. Cargo transportation fees are very high. Buyers don't agree. Shipping products by air will increase the financial burden on them, which ultimately falls on the shoulders of consumers. As a result, buyers are not willing to ship by air. Air cargo costs $2.50 per kilogram of clothing, currently Tk 250 in Bangladeshi currency. On the other hand, if the product is shipped by sea, the price per kg is 30 cents, or Tk 37. The garment owners have to ship the goods by sea despite the risk in this situation.
The Executive President of BKMEA, Mohammad Hatem, said that there is a problem in sending clothes to European destinations due to the current situation in the Red Sea. "Freight hassles and lead times have increased. Costs are also increasing. Apart from this, due to a gas shortage, we are unable to deliver the product within the stipulated time. As a result, we have had to cancel many shipments. But if the government ensures gas supply, then we will be able to compensate for the loss to some extent."
"Our big market is Europe. To send garments to Europe, our ships go from Chittagong to Colombo in Sri Lanka or via Singapore via the Red Sea and the Suez Canal to Europe. It is known to us as a regular and less-timed route. But because of the crisis, not every mother-line vessel (ship) wants to go through the Red Sea for safety reasons. As a result, the lead time has increased," said TAD Group Managing Director Ashiqur Rahman Tuhin.
"My concern is about the lead time and the price. Then there is the gas crisis. Shipments are already delayed due to a gas shortage. The lead time has increased on that. Due to this lead time, some orders and purchases will go to other countries," he added. "We have to be a little careful while pricing our products. The price should be determined keeping these things in mind. Then we can be in a safe position," he suggested.
