SRI LANKA: Garment exporters to face increase in export cost

COLOMBO: As the shipping charges to Europe have increased the cost of exporting to Europe will go up over the next one year period.

The Sri Lanka Freight Forwarders Association (SLFFA) has warned exporters that the Prices on the European trade line, including the Mediterranean, have increased by around US$ 800 for a 40 foot container within this year so far and we are expecting another price increase in September.

The increase in export cost is going to reduce the profitability of the exporters said Chairman of the SLFFA, Niral Kadawatharatchie at the SLFFA annual general meeting on Wednesday.

Garment exports averaging US$ 2 billion (approx) constitutes almost 33% of the export earnings.

According to the freight forwarders, shipping costs to the EU is increasing because Chinese exports to the EU are increasing and the expanding Chinese exports are taking up more space in ships and reducing available space for Sri Lankan cargo.

The freight rates are going up due to reduced space in the ships calling at the port of Colombo. The space allocation for Sri Lanka as an export loading port has reduced drastically over the past few months.

The US dollar has depreciated and the European currency has been appreciating. The US purchasing power has reduced and the EU’s purchasing power has increased.

The EU is importing more from China making the the ships on the EU trade link  full. So ships coming to the port of Colombo don’t have enough space for Sri Lankan exports.

“Because of the demand on the limited ship space, the freight rates are going through the roof. The prices have been increasing every three months and we can expect another US$ 400 price increase in September,” said Kadawatharatchie.

This is only due to the shipping lines increasing their charges because of the demand, said Kadawatharatchie.

Sri Lanka’s imports rose to US$10.2 billion in 2006 from US$8.8 billion in the previous year while exports recorded a nominal increase of US$0.5 billion during the same period. The petroleum import bill increased to US$3 billion from 2.8 billion and the increase for 2007 is expected to be much higher. The worker remittances that recorded US$ 2.3 billion in 2006 are now a major foreign exchange earner.


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Added: July 1, 2007 Source: Agencies
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