Oslo-listed BW LPG has sold its very large gas carrier (VLGC) BW Empress to Bangladesh-based Bashundhara Oil and Gas for approximately $40m.
The 2005-built vessel, renamed to Bashundhara LPG Warrior, was delivered on April 15 and should bring net book gain of around $10m to BW LPG.
“BW Empress was sold for an attractive price in a volatile market. This sale is aligned with our asset management strategy, as we maximise the value of our current assets on water while considering the best way forward in our journey towards a zero-carbon future,” said Anders Onarheim, CEO of BW LPG.
With this sale, BW LPG owns and operates a fleet of 45 modern VLGCs, including four of the world’s first VLGCs to be retrofitted with LPG dual-fuel propulsion. The company has committed a further 11 VLGCs for retrofitting with this technology, representing an overall investment of over $130m.
Bangladesh is a riverine country located in South Asia with a coastline of 580 km (360 mi) on the northern littoral of the Bay of Bengal. The delta plain of the Ganges (Padma), Brahmaputra (Jamuna), and Meghna Rivers and their tributaries occupy 79 percent of the country.
Air freight rates out of Bangladesh have doubled in recent months, spiked by a severe capacity crunch due to coronavirus-linked operational suspensions and growing demand.
Shippers are now paying twice pre-pandemic rates for expedited shipments, which they describe as a “big burden in this challenging period”.
To carry goods to European airports, air cargo operators are charging more than $3.65 per kg, compared with $1.80 in March last year, and $6.20/kg to North America, up from $2.85 in last year.
Nearly 40 airlines were carrying cargo from Bangladesh prior to the pandemic, and half of them have suspended flights or drastically reduced frequency.
Apparel remains the top export item out of Bangladesh to the main markets in Europe and America, but the pandemic has severely affected import markets, with lower sales there, even during Christmas.
Bangladeshi apparel makers are thus receiving fewer orders and frequent order suspensions, which also brings down cargo volumes for air shipment.
Before the virus, around 700 tonnes passed through Dhaka’s Hazrat Shahjalal International Airport each day. Now, it is around 400 tonnes, which has forced the freighter operators to decrease flight frequency.
Vice president of Bangladesh Freight Forwarders Association (BAFFA) Syed Md Bakhtiar told The Loadstar most Bangladeshi cargo was carried by Middle Eastern carriers, now mostly using passenger planes with the remainder by freighters.
“Due to the fall in passenger traffic the number of flights has decreased drastically, thus the carriers increased the freight rates to cover losses,” he said, adding that the flight frequency of freighters had decreased by 50%-60% creating the capacity crunch.
Mr Bakhtiar was hopeful of a freight rate decline once air flight capacity and frequency increased after the pandemic situation eases following mass vaccination programmes.
First vice president of the Bangladesh Knitwear Manufacturers and Exporters Association Mohammad Hatem said: “Recently, I had to pay $8-$9 per kg for air shipment of goods, compared with $2.50-$3 before.
“The increased air freight rate is a big burden for apparel makers, as while the pandemic raged, they hardly get any orders that guarantee profit.”
The logistics and freight forwarding business in Bangladesh has been devastated by the global coronavirus pandemic, which has led to a nosedive in transportation of goods by land, air and sea.
Of the 3.5 lakh-odd trucks and covered vans engaged in the transportation of goods between Dhaka, its adjacent districts and Chittagong port, nearly 70 per cent carry textile and garment items, while the rest transport products for other sectors.
And since most of the garment factories are now closed, their business has hit rock-bottom, industry insiders said.
During the shutdown, transportation of other goods like vegetables and construction materials is very scarce, said Syed Md Bakhtiar, executive president of Bangladesh Truck and Covered Van Owners Association.
The average price of a truck or van is Tk 20 lakh and it fetches them Tk 2.5 lakh per month.
“Although we have no income now, we have to pay salaries of the drivers and other staff,” he said, adding that they also have to pay bank loans as most of the vehicles were bought on credit.
The 30.5 lakh people directly and indirectly employed in the sector are sitting idle now, Bakhtiar added.
Freight forwarding business has also come to a halt due to the new situation, said Kabir Ahmed, president of the Bangladesh Freight Forwarders Association (BAFFA).
For instance, on a usual day, some 600 tonnes of cargoes are imported via Hazrat Shahjalal International Airport but the quantity has dropped to only 250 tonnes a day now.
About 800 tonnes of goods were exported through the airport on a normal day, but the volume has now fallen to 50 tonnes.
Of the export consignments sent through the airport, 70 per cent are textile and garment items.
The cargo village at the airport is also taking the strain due to slow delivery of goods amid the ongoing countrywide movement control order: though about 250 tonnes goods pile up in the cargo village every day, only 50 tonnes are delivered.
So far more than 2,000 tonnes of goods have been stockpiled in the cargo village that has a capacity of 800 tonnes.
Subsequently, valuable goods are left under the open sky and unattended, leading to deterioration in their quality, Ahmed said.
The BAFFA is planning to seek faster delivery of goods from the cargo village from the customs commissioner, he said, adding that they have informed the commerce ministry last week that the freight forwarders have incurred losses of Tk 1,500 crore over the last one and a half months.
Moazzem Hossain, commissioner of Dhaka customs house, said they are working seven days a week to deliver the imported goods from the cargo village at the airport.
Many importers are not taking delivery of their goods on time, which has led to congestion at the cargo village, he added.
M Mafidur Rahman, chairman of the Civil Aviation Authority of Bangladesh, also said they are providing round-the-clock services for faster delivery of the imported goods from the Dhaka airport.
But the backlog doesn’t seem to be clearing up fast enough.
SHIPPING INDUSTRY IN A ROUGH PATCH
The container shipping industry that was first dealt a blow in January by an import crunch amid the coronavirus outbreak in China is facing new shocks now.
Though import volume slightly increased since February with Chinese factories gradually resuming production, the sector is bogged down by a dearth of export consignments and container congestion at Chattogram port.
Import of containerised cargo through the port fell 16.70 per cent to 108,718 TEUs (twenty feet equivalent units) in February from the previous month, according to data from shipping agents.
A total of 134 container vessels arrived at the port in February, against 154 in January.
Since most of the raw materials for the garment sector are brought from China, the supply was heavily disrupted in January and February when Chinese factories suspended production, said Shahed Sarwar, deputy managing director of Chowdhury Group, local agent of feeder operating firms Feedertech and Foremost Maritime.
Vessels hardly get 40 per cent of the expected import cargoes while some vessels had to remain idle.
“We had to drop one of the vessels from our fleet,” he added.
Since the last week of March the volume of export consignments has been witnessing a drastic fall as most of the local garment factories remain closed, Sarwar said.
A vessel named Delaware Trader that left the port on April 4 got only 590 TEUs of export containers, while the vessel used to ship 2,200 TEUs to 2,300 TEUs on usual days.
Md Ajmir Hossain Chowdhury, assistant general manager of the ship’s local agent Marco Shipping Company (BD), said feeder operators are counting huge losses for carrying such a poor number of export containers.
Slow delivery of imported goods from Chattogram port has created acute container congestion resulting in long queues of vessels. A total of 36 container vessels were waiting at the outer anchorage yesterday.
Vessels are now forced to wait for seven to eight days at the outer anchorage and thus the operators are counting a huge amount of losses since they have to bear an additional charge of $10,000 to $16,000 for each day of idle stay, said Ahsanul Hoque Chowdhury, chairman of Bangladesh Shipping Agents Association.
Sabbir Rahman Khan
Bangladesh Foreign Trade Institute (BFTI)
The logistics and freight industries in Bangladesh have been thriving for years in line with the steady growth of exports and imports, according to industry insiders. In Bangladesh, the industry came into being in 1991-92. Initially, there was no guideline and policy regarding the industry and even government officials, exporters and importers had a scarce idea on how to operate the industry.
In the current context, foreign companies mostly open joint ventures with our local companies and this collaboration built the foundation for further accumulation of domestic logistical expertise. It is worth mentioning that logistics companies carry out all responsibilities, including loading and unloading until goods reach warehouses.
Since Bangladesh’s annual export and import trade volume reached US$100 billion, the sector has a huge potential to improve. According to the Agility Emerging Markets Logistics Index (AEMLI) of Kuwait-based Agility Global Integrated Logistics, Bangladesh has jumped eight spots and ranked 15 in 2019, considered as the worlds’ leading emerging markets for logistics.
This is the largest gain of any market in the 50-country “Agility Emerging Markets Logistics Index 2019”, according to a recent survey.
For Bangladesh, improving its logistics performance provides an opportunity to increase its world market share in garments and textiles, which account for 84% of its total exports, expand into new markets, and diversify its manufacturing and agriculture into high-value products.
In the context of Bangladesh, the development of export-related logistics has been stimulated by foreign freight forwarders and 3PL, i.e. foreign parties that integrate warehousing, transportation and other logistic services.
These foreign parties usually conclude joint venture agreements with local Bangladeshi parties. These forms of collaboration create a foundation for the further cultivation of domestic logistical expertise.
Currently, about 1,600 local and 20-30 international logistics and freight forwarding companies are providing necessary support to the export and import sector in Bangladesh.
The total business hovers around US$1.5 billion to US$2 billion and the industry directly generated about 40,000 jobs in the last three decades.
About the logistics business in Bangladesh, the dominating subsector is the freight transport services sector. It is worth mentioning that Bangladeshi export-related logistics, especially that of food and textile, are operationally advanced while the rest of the logistics sector in Bangladesh is unsophisticated.
The Agility Emerging Market Logistics Index (AEMLI) identifies: air cargo carriers, shipping lines, freight forwarders and distribution property companies will have the highest business viability in the logistics sector of Bangladesh.
Dominant logistics subsectors in Bangladesh
Various studies identified several subsectors in this area evident in Bangladesh, such as (1) wholesale trade services; (2) retail trade services; (3) freight transport services; (4) cargo handling services; (5) storage and warehousing services; (6) postal and courier services; and (7) 4PL.
However, a study by Nyenrode Business Universiteit, the Nederlands pinpointed the subsectors having a strong dominance in this business, they are as follows:
Freight transport agency services;
Air and space transport services of freight and
Cargo handling services.
In the context of Bangladesh, rail and road freight are major segments for inland services. Shipping freight’s share in the export and import business in Bangladesh stands at 80%, while that of air and road is 20%. In general, logistics companies provide transport services of freight through sea, road and airways. However, the rail transport of freight for exports and imports is yet to be introduced in Bangladesh.
The annual turnover scenario in the Bangladesh market
The study conducted by Nyenrode Business Universiteit, the Netherlands, further found that most of the logistics businesses in Bangladesh are MSMEs and have an annual turnover of Tk. 15 million up to Tk. 100 million. On the other hand, well-renowned companies (i.e. both MSMEs and large) see an average annual turnover of Tk. 100 million or more, but at least less than Tk. 1 billion. Additionally, newly established MSMEs and large conglomerates showed an annual turnover trend of less than Tk. 15 million or more than Tk. 1 billion.
Nine (9) ministries and more than 20 government agencies play roles in setting policies and regulations, planning, operating infrastructure, and providing services.
Bangladesh Freight Forwarders Association (BAFFA);
Bangladesh Cargo Vessel Owners Association (BCVOA);
Coastal-Ship Owners Association of Bangladesh (COAB);
Bangladesh Master Stevedores Association (BMSA);
Bangladesh Shipping Agents Association (BSAA);
Cargo Handling Agents’ Association (CHAA);
Outsourcing and Logistic Service Provider Association of Bangladesh (OLSPAB).
Regions of business concentration
Dhaka and Chittagong are the largest logistics business clusters because these two cities are (a) major hubs of manufacturing units (b) Origin of EXIM trade and (c) largest consumption centers of the country. Dhaka has evolved as a central warehousing hub of the country.
Chittagong, being the gateway for international trade & accounting for 90% of export-import cargo, has become the most important center for EXIM based warehousing. These two clusters jointly occupy 70% of warehousing space.
However, various other regional logistics business clusters or distribution hubs such as Khulna, Barishal, Bogura, Rangpur, Cumilla have also emerged as logistics and warehousing destination primarily for catering domestic consumption market.
In Bangladesh’s transport and logistics infrastructure sector, the majority of the financial assistance comes from the ADB, the World Bank, the UK via the Department for International Development (DFID), Japan and via the Japan International Cooperation Agency (JICA) and finally South Korea.
Major challenges impeding logistics business growth in Bangladesh
Nine ministries and more than 20 government agencies play roles in setting policies and regulations, planning, operating infrastructure, and providing services. The fragmented governance of the logistics sector exacerbates the coordination problem intrinsic to infrastructure development, leading to transport modes that developed and evolved in silos and basic mismatches of infrastructure standards, such as bridges that are narrower than approach roads.
Service providers cannot track and trace shipments. Because of the low quality of services, many manufacturing firms provide their logistics needs in-house to better control the performance of their supply chains.
There is no competition in logistics service markets in Bangladesh. The involvement of unions and associations prevents direct interaction between service providers and shippers. As service providers are not rewarded for the quality of their services, they have no incentive to provide high-quality services or innovate.
High trucking rates due to inefficiencies in the transportation and logistics system, low truck utilization, extreme levels of congestion in roads and ports, and a large number of trips of empty trucks are the main causes. Truck owners count that 35 percent of the trips have empty trucks.
Instances of unprofessional behavior by logistics service providers. Most truck drivers are low skilled and illiterate.
Lack of skill-training relating to modern warehousing (i.e. temperature-controlled transport & storage), cross-docking, inventory management, efficient customer service, cold chain, etc.
 The WBG report Moving Forward: Connectivity and Logistics to Sustain Bangladesh’s Success