Airfreight rates out of Dhaka are expected to surge after India cancelled transhipment access for Bangladeshi exports.
In an announcement on Tuesday, India’s Ministry of Finance confirmed it had rescinded access to transhipment for “export cargo from Bangladesh destined to third countries through land customs stations to [Indian] ports and airports”.
Responding, one Dhaka-based forwarder said that unless airlines reacted, the short-term outlook was gloomy.
“If the airlines cannot increase the capacity from Bangladesh, the impact will be very bad, with the airlines increasing rates abnormally, and we will see the demand in the ad-hoc charter also spike upwards,” the forwarder noted.
Last August the Bangladeshi government collapsed, with prime minister Sheikh Hasina fleeing to India amid a wave of protest. Since then, the country’s garment manufacturers have been forced to contend with a precarious political climate and increasing strikes at the country’s main container gateway, Chittagong.
And there have been efforts by its neighbour to muscle in on the industry which Bangladesh has dominated for decades.
Asked why the forwarder thought the Indian government had taken this decision, they said it was all about helping its garment manufacturers, but added that while some short-term volumes would be lost to India, it would not last.
“In the long run they will not be able to compete Bangladesh,” the forwarder explained. “This is because they cannot compete with both the expertise and with the low cost of the labour. Short-term, though, rates from Bangladesh will climb and airlines will look to take control of the market, squeezing capacity.”
Furthermore, the forwarder suggested, Delhi’s move could backfire by creating possibilities for China to supplant India as the favoured transhipment hub.
Noting China already offers Bangladeshi exporters a transhipment option via Nanjing Lukous International Airport in the east of the country, the forwarder said the Chinese may look to “take advantage” of the situation.
“China has shown that it is open to offering other routes after supplying transhipment during previous peaks,” they said.