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November 30, 2023

Direct shipping is better than third-country EXIM cargo

India and Bangladesh have been working together to advance and defend shared marine interests since the International Tribunal for the Law of the Sea resolved the maritime boundary delimitation case in 2014.

The Coastal Shipping Agreement, the Protocol on Inland Water Transit and Trade, and the Agreement on the Use of the Chattogram and Mongla Ports (ACMP) for the Movement of Goods to and from India were all signed by the two nations in 2015. In August 2022, India conducted the first of four testing runs on the Mongla-Tamabil and Mongla-Bibirbazar lines to fully operationalize the ACMP.

Welcoming the successful transit trials, India looked forward to their full operationalisation and reiterated to work towards the expansion of the bilateral Coastal Shipping Agreement to include third-country EXIM cargo.

According to Load Star online on 12 September, 2022, “Bangladeshi businesses applauded the Indian offer as it will facilitate their EXIM trade significantly, enabling them to send and receive cargo while avoiding the Chattogram Port, which often faces congestion.”

Actually, one will need time to recollect when Chattogram Port (CP) had congestion the last time. The CP handled 70.630 million tons of cargo and 2.258 million TEUs (twenty-foot equivalent, a unit of cargo capacity) of container in 2015-2016; 117.383 million tons of cargo and 3.230 million ton TEUs of container in 2021-2022.

The ship turnaround time reduced to 2.43 days in 2021-2022 from 4.70 in 2015-2016. Construction of the Patenga Container Terminal has increased container handling capacity by 2.37 million TEUs.

The Bay Terminal will increase cargo and container handling capacity by 5 million tons and 3.08 million TEUs respectively. With capacity growth and efficiency, CP’s global ranking was 64th in 2021.

Besides the CP, the Mongla Port (MP) is coming back to life after decades of low-level activities. In 2015-2016, MP handled 5.798 million tons of cargo, 25,597 TEUs containers and 14,969 cars.

In 2020-2021, it handled 11.945 million tons of cargo, 29,785 TEUs containers and 14,474 cars. With the inauguration of the Padma Bridge, car handling jumped to 20,009 till May 2021-2022 and the ship turnaround time reduced to 3.68 days in 2021-2022 from 4.89 in 2015-2016.

Besides expanding the capacities of the two seaports, the government is building Bangladesh’s deep sea port at Matarbari in Cox’s Bazar district. Construction of large-scale facilities will enable mother vessels to dock at Matarbari and reduce dependence on ‘third-country EXIM’. This deep sea port has great potential to emerge as a new international hub for transhipment.

Bangladesh’s exports and imports have been third-country dependent. Feeder vessels transport goods to a third-country port where goods or containers are on-boarded mother vessels sailing for destination ports across the continents. A reverse procedure is followed for imports i.e mother vessels discharge imported goods at the third-country port where from the feeder vessels transport goods to CP or MP.

Third-country EXIM cargoes are prone to both man-made and natural risks. In April 2021, over 25,000 imported containerised goods were stuck due to the pandemic, in the seaports of Sri Lanka, Singapore, and Malaysia, thus holding up or slowing down industries due to raw material shortages.

Exporters feared missing shipment deadlines, especially the fashion industry’s fast-moving consumer goods.

From an international trade perspective, direct shipping is preferred to third-country EXIM. At the backdrop of the crisis of April 2021, Chattogram Port Authority (CPA) took the initiative and made direct shipment of 952 TEUs containers from Chattogram to Ravenna Port in Italy in February 2022, which reached in 16 days.

The learning curve grew over the next couple of months. CPA with the cooperation of Main Line Operators (MLOs) and Shipping Agents has successfully launched direct shipping services to seven of its 20 major routes. It is also working to launch direct shipping to Portugal, Slovenia, Thailand and the Middle East.

Direct shipping has benefited businesses with reduced cost, cutting the voyage time and most importantly, instilled confidence in MLOs and Shipping Agents about the potential of direct shipping from Bangladesh.

Direct shipment has halved the voyage time and cut shipping costs by 40%. All European destinations are being connected to direct shipping routes. For example, container services from the Koper Port in Slovenia are connected to Austria, Slovakia, Hungary, Poland, Italy, Germany, Croatia, Bosnia and Herzegovina, and Serbia. Also, the CPA held a meeting with the Slovenian delegation on 21 June 2022.

Bangladesh presently uses three ports for EXIM cargoes. These are the ports of Singapore, Colombo or Hambantota and Port Klang. These ports have a proven track record of being an international hub for transhipment.

India’s offer will be the fourth ‘third-country EXIM port’ for Bangladesh. Bangladesh Foreign Trade Institute (BFTI) conducted a feasibility study on the proposal which recommended that the proposed routes through the Vishakhapatnam, Krishnapatnam, Kolkata and Haldia ports in India are not commercially viable.

Kolkata and Haldia Port suffer from low draught and cannot berth large vessels. Vishakhapatnam and Krishnapatnam handle mother vessels destined for Malaysia, China and South Korea. Vessels from these two ports do not go directly to the US and European destinations. Exports from these ports to the US and Europe are transported to the ports of Singapore/Colombo/Port Klang and transhipped from there. Ports of Vishakhapatnam and Krishnapatnam may exercise an option, i.e transporting Bangladesh’s EXIM cargoes over land to a port on India’s west coast, say Jawaharlal Nehru Port Trust, Mumbai, and tranship from there.

Anyway, third-country EXIM through Indian territory will add one or more layers to Bangladesh’s export and import, increasing voyage time, freight costs, insurance costs, port handling charges etc and adding more man-made and natural risks.

Bangladesh is making steady progress in direct shipping. The development of Matarbari Deep Sea Port has the potential to berth vessels of 18-meter draft. At this point, Bangladesh should augment and expand the present initiative of direct shipping and take adequate measures to make Matarbari Deep Sea Port a hub of international shipping for transhipment.

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