According to reports, the 700% increase in international freight rates for the sea, rail, and air routes is being linked to abnormal growth in imports as the global economies reopen following COVID-19 pandemic-related lockdowns.
This has also cancelled out the positive impact of incentives granted by the government for some imports, which may result in imported inflation in the country.
Talking to the media, Pakistan International Freight Forwarders Association’s Former Chairman and CEO of Agility Pakistan, Malik Moin said that freight charges for cargo in a 20-feet container arriving from China to Pakistan increased to $2,000-$3,000, as compared to around $700 in June 2020. Pakistan mostly imported cargo through the Far Eastern countries like Thailand, China, Hong Kong and Singapore, he added.
Though the international freight charges have surged by up to 500-700% over the past couple of months, some experts believe that they might go back to pre-pandemic levels in four to six months.
Pakistan Ships Agents Association Chairman, Mohammed Rajpar, said that the pandemic had bought cargo supply chain around the world to a standstill due to which the containers remained stuck in several countries owing to the lockdowns. This widened the gap between demand and supply (of imported cargo) which ultimately had to be filled by price equalizer.
The situation emerged post-COVID due to imbalances in the number of ships and the number of containers for global trade, said Rajpar. The government may not be able to correct the situation on its own now and neither is it responsible for the surge in the international market but it what it can do is focus on increasing the shipping companies in the long run so that it has the capability to intervene.
It is also being said that regional and international companies have formed a cartel to impose unreasonably high freight rates in an attempt to cash in on the post-Covid situation. The shipping companies are paid $5-6 billion in international freight charges by Pakistan’s exporters and importers.
In pre pandemic days, many shipping companies had gone bankrupt around the world and many others had been operating in losses for about three to four years. During the pandemic, the number of top international shipping company had come down to three or four as many were taken over by others and some merged together to survive the crisis.
CEO Pakistan Business Council, Ehsan Malik said that though Pakistan is not the only country affected by this, keeping in mind the high demand for textiles from Pakistan compared to other countries, delays in shipments can result in lost opportunity if others step up production as COVID subsides.
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) former president Zubair Tufail complained that the spike in international freight charges had increased the cost of doing business in Pakistan.
Experts say that the government should lend its support to freight forwarders and logistics companies if it wants to control such a situation in future.