Fuel crisis turns goods delivery into a nightmare for businesses

Highlights:

• Fuel crisis idles 40-50% trucks, disrupting nationwide supply chains
• Middle East conflict drives oil prices, restricts global fuel supply
• Freight costs surge; transport shortages delay deliveries and raise expenses
• Production hit by fuel shortages, rising costs, stranded goods
• Demand weakens; companies unable to pass costs, margins shrink sharply
• Multiple shocks threaten business survival, risking loans and operations

Pran-RFL Group operates a fleet of more than 4,000 trucks to transport raw materials and deliver finished goods to hundreds of dealers across the country.

Now, 40-50% of those trucks are sitting idle, grounded by an acute fuel crisis stemming from the Middle East conflict that began nearly two months ago.

The disruption is no longer confined to a few sectors. From large conglomerates to small and medium enterprises, businesses across Bangladesh are grappling with a supply chain breakdown that is raising costs, delaying deliveries, and squeezing cash flows.

Infograph: TBS

"Delivery of finished goods has become a nightmare," said Mohammad Khorshed Alam, deputy managing director of AkijBashir Group. "We are not getting trucks even after offering 15% higher freight."

Freight costs for sea trade have already tripled, while domestic transport networks have grown increasingly fragile, making day-to-day operations unpredictable, he said.

Even companies with their own logistics capacity are struggling. Pran-RFL Group, despite its large fleet, is facing severe constraints.

"The fuel crisis is not only disrupting our supply chain but also affecting production," said Kamruzzaman Kamal, marketing director of Pran-RFL. "There is a gas shortage, and many of our factories rely on furnace oil and diesel to run machinery. Manufacturing is being badly disrupted."

Kamal added, "Whatever goods are produced are often stranded at factory gates. Pran has suspended the use of smaller vehicles and is consolidating shipments onto larger trucks to maximise limited fuel availability. We cannot reach our goods door-to-door anymore."

The global crisis

The global fuel crisis has emerged following the Iran war, which has severely disrupted oil flows through the Strait of Hormuz – a key shipping route. The conflict pushed crude to around the $105-107 per barrel range, its highest in years.

In Bangladesh, the crisis is having a direct impact. As global prices remain high and import costs surged, Bangladesh increasingly is relying on spot market purchases and direct procurement from suppliers to secure fuel supplies. 

The government initially tried to shield consumers by delaying fuel price adjustments. Eventually, the government raised diesel prices to Tk115 per litre, octane to Tk140, and petrol to Tk135, marking increases of Tk15 per litre for diesel, Tk20 for octane, and Tk19 for petrol.

Analysts said the fuel price hike will have a broader effect on inflation. Higher transport costs are expected to feed into supply chains, pushing up prices of food, agriculture inputs, and consumer goods, adding fresh pressure on already elevated living costs.

Crisis hits production cycle

The strain is compounding across the production cycle. Rising fuel prices, higher freight charges, and escalating raw material costs are pushing up production expenses, while weak demand is limiting companies' ability to pass on those costs.

Masudur Rahman, deputy general manager (external affairs) at Safwan Bashundhara Global, said the impact of the Middle East crisis is pushing the group's paper and cement businesses towards a critical point.

Freight costs for importing raw materials have surged from $8 per tonne to $14 per tonne, while diesel shortages have rendered heavy factory equipment inoperable.

"Because of the diesel crisis, our delivery capacity has dropped by about 50%. Where we used to receive Tk20 crore from the market daily, it has now fallen below Tk10 crore," he said.

In some cases, production costs have risen by as much as 20%, but companies are reluctant to raise prices given the pressure on consumers. As a result, margins are shrinking rapidly.

Compounding the problem, demand is weakening. Since many of these goods are not essential, consumers are cutting back on items such as tissue and toiletries, further tightening cash flow for manufacturers.

Multiple shocks

The cement sector offers a stark illustration of how multiple shocks are converging.

Almost all key inputs for cement, such as clinker, limestone and gypsum, are imported, with a significant share sourced from Oman and the UAE. Supplies from these regions have been disrupted for nearly two months due to conflict-related port closures.

At the same time, higher freight costs have sharply increased import expenses, while diesel shortages are repeatedly forcing factory shutdowns, as cement plants rely heavily on fuel-powered machinery.

The logistics bottleneck extends to ports as well. Shortages of diesel have curtailed the operation of lighter vessels, increasing waiting times for mother vessels at outer anchorage from five days to as long as 12 days. The resulting demurrage charges are substantial.

"Costs have risen by 40%, while collection from sales has dropped by more than 50%," Masudur Rahman said.

Efficiency spirals

Transport constraints are also reducing efficiency across industries. 

Mohammed Khurshed Alam, executive director of Fresh Cement under Meghna Group of Industries, said truck utilisation, both owned and outsourced, has fallen to around 50%.

"Previously, a truck could complete one trip a day. Now it takes two days for a single trip, but we still have to pay drivers even when vehicles remain idle," he said.

Export-oriented sectors are under similar pressure. Md Badsha, founder of Badsha Group of Industries, said his textile and garment operations are struggling to meet deadlines.

"Truck freight has doubled, yet we are unable to deliver goods," he said, adding that the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) is planning to introduce a fuel pass system to ease the crisis.

For businesses, the situation is rapidly becoming unsustainable. With transport networks disrupted, production constrained, costs rising, and demand weakening, companies are being squeezed from all sides.

Industry insiders warn that unless fuel supply stabilises soon, the crisis could deepen further, threatening not just profitability but the ability of many firms to continue operations and repay bank loans.

"Amid this situation, it is no longer just about higher costs," said a cement maker. "It is about survival."