War shock drives freight surge from sea to road in Bangladesh supply chain
Before the war began on 28 February, the bunker surcharge per container was at $700-$750. It has now surged to $3,500, excluding the additional war risk premium, according to industry insiders
The ripple effects of the Middle East war are rapidly disrupting Bangladesh's supply chain, pushing up freight costs from international shipping to domestic trucking and raising fears of higher consumer prices amid weaker export demand.
Shipping companies have already imposed hefty bunker surcharges, an extra fee added to freight rates to cover sharp increases in fuel costs.
Before the war began on 28 February, the bunker surcharge per container was at $700-$750. It has now surged to $3,500, excluding the additional war risk premium, according to industry insiders.
For example, the base freight from Chattogram to Europe is about $1,000-$1,200 per container. Adding the bunker surcharge worth $3,500, the total freight paid by exporters or importers rises to around $5,000 per container.
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The pressure is not limited to international shipping. Inside the country, transportation costs have also spiked amid a worsening fuel shortage.
For instance, the fare for a covered van travelling from Dhaka to Chattogram Port jumped to Tk25,000 yesterday, up from Tk15,000-16,000 a day earlier. Lighterage vessels that ferry imported goods from mother vessels at the outer anchorage are also struggling to secure enough diesel to complete round trips.
Truck operators report facing similar fuel shortages, with some alleging they are being forced to buy diesel at prices higher than the official market rate – costs that are ultimately passed on to consumers.
The core of the crisis for heavy vehicles lies in the severe shortage of diesel at pumps.
Md Tofazzal Hossain Majumder, president of the Bangladesh Truck-Covered Van Owners' Association, said the situation has become dire for long-haul drivers.
"A truck requires 140 to 160 litres of diesel for a Dhaka-Chattogram round trip. But currently, when our drivers go to a pump, they are given only 20 to 50 litres. To keep the supply chain moving, we are being forced to buy smuggled or black-market fuel at Tk120 per litre, whereas the official pump rate is Tk100," Tofazzal told TBS.
He demanded that the government ensure an adequate supply of diesel at all pumps and deploy law enforcement to curb the black-market sale of fuel.
Transport cost surge hits commodity supply
The diesel crisis is already trickling down to the consumer level as transport costs for industrial and construction materials have risen sharply within a week.
Hamidur Rahman Tushar, a Lalmonirhat-based businessman dealing in construction materials, said truck fares have increased by Tk3,000 to Tk7,000, depending on the route.
"Previously, hiring a small truck from Narayanganj or Dhaka cost around Tk13,000-14,000. Now, it has reached Tk17,000-18,000. For goods coming from Chattogram, the fare has jumped from Tk28,000 to around Tk32,000-35,000," Tushar said.
The crisis has hit the transportation of perishable goods particularly hard. With a significant number of trucks taken off the roads due to the fuel crunch, the supply chain for daily essentials, including vegetables, fish and poultry, from regional hubs to Dhaka has been severely disrupted.
Fearing their produce may rot due to delays, traders are being forced to hire trucks at much higher rates. Market insiders warn that the sudden spike in freight costs will inevitably push up prices in the capital's kitchen markets.
On the highways, drivers carrying essential commodities say they are struggling to secure fuel.
Truck driver Md Sagar, who was transporting rice from Bogura to Cox's Bazar, said he needed at least 220 litres of diesel for the trip but managed to collect only 50 litres after visiting five to seven filling stations.
Similarly, Ashraful Islam, travelling from Jashore to Dinajpur to load paddy, said most stations refused to sell more than Tk500 worth of diesel, even when he offered to pay extra.
"If we don't get a full tank, we have to keep stopping at night, which messes up trip costs and puts the cargo at risk," Sagar said.
"Our trucks supply essential food items to Dhaka. If trucks face a fuel shortage, commodity prices will go up," a trader from Bogura said.
Fuel rationing deepens crisis
The fuel crisis has been compounded by a rationing system set by the Bangladesh Petroleum Corporation (BPC), which has triggered panic buying among motorists and long queues at filling stations.
Syed Sajjadul Karim Kabul, president of the Bangladesh Tank Lorry Owners Association, described the rationing system as "unrealistic" and blamed it for the growing market panic.
"There is a massive transportation deficit because we are not getting enough fuel from the depots. A tank lorry with a capacity of 13,500 litres is being given only 4,500 litres. Some are getting 4,000, or even just 1,000 litres," Kabul said.
"Because the transport fare remains fixed, delivering fractional amounts wipes out the profit margins for both lorry owners and pump owners."
As a result, many filling stations are refusing to accept partially filled tank lorries, leading to fuel shortages at the retail level. Pump owners are also laying off staff or shutting down operations entirely because it is no longer financially viable to keep stations open with such a limited fuel supply.
Kabul urged the government to immediately lift the rationing to reduce panic buying.
What large commodity traders say
Despite the transport disruptions, large commodity suppliers say they have adequate stocks of edible oil and other essentials.
Taslim Shahriar, deputy general manager of Meghna Group of Industries, said the company imported more edible oil and sugar than usual in January and February.
"More than 50,000 tonnes of oil are being supplied each month. There should be no shortage," he said.
Responding to a question about the unavailability of 2-litre and 5-litre bottles in the retail market, Shahriar said their supply chain is functioning normally. If shortages emerge at the dealer level, the Directorate of National Consumer Rights Protection should take action, he added.
Echoing a similar view, Biswajit Saha, executive director of City Group, said the company has not reduced supply.
However, he noted that some smaller companies are unable to import edible oil due to complications in opening letters of credit (LCs). He added that additional demand during Ramadan and stockpiling by some consumers may have created the perception of a shortage.
Zahurul Islam, business manager of ACI Limited, said the country's current soybean oil stock would last about one month.
"So far, we have not increased oil prices. There should be no need to raise prices in the next 15-20 days. However, if crude oil prices rise in the global market, the impact will be felt everywhere," he said.
