The Covid-19 outbreak caused enormous supply chain disruptions around the world, driving up transportation prices to new highs. International freight charges have increased by three to five times, according to domestic traders, driving up the cost of imports. At the same time, the cost of carrying outbound cargo has increased by about eightfold.
“Freight rates have escalated exorbitantly after the pandemic,” Sunil Kumar Dhanuka (Bansal), head of the Nepal Foreign Trade Association, told the Post. A 20-foot container costs $6,000-$6,500 to carry from China to Nepal, and a 40-foot container costs $10,500-$11,500.”
Before the epidemic, a 20-foot container cost $1,800-$2,000, and a 40-foot container cost $2,800, he claimed.
“Clearly, rising delivery costs have a direct influence on consumer prices,” Bansal added. “A stronger dollar raises the cost of goods and the transportation expenses that are put on top of it,” Bansal explained. “An rise in freight expenses equals a 20-25 percent increase in the price of goods for traders.”
In nations like Nepal, shipping costs account for a significant portion of food and non-food pricing.
“The dollar has been strengthening against the Nepali rupee in recent months, with the exchange rate reaching Rs123,” Bansal added.
“The increase in freight costs and the rise in dollar rates have harmed both exporters and importers.” Traders from all around are finding things difficult due to a worsening liquidity shortage and an increase in the bank interest rate,” he stated.
Nepal’s imports skyrocketed to Rs1.53 trillion in the last fiscal year 2020-21, up 28.66 percent from the previous fiscal year 2019-20, according to the Department of Customs. In the fiscal year 2018-19, total imports was Rs1.41 trillion.
Exports increased 44.43 percent to Rs141.12 billion in the fiscal year 2020-21, according to government figures. In the fiscal year 2018-19, exports totaled Rs97.10 billion.
Not only have prices risen, but dealers now have to wait more than 25 days for a shipment to arrive, according to Bansal.
“The daily caseload of the Omicron variety is expanding globally, even in neighboring India,” Bansal added, “and this is projected to result in supply chain difficulties, similar to the first and second waves of the Covid pandemic.”
“We’ve started to experience Omicron’s impact in the supply chain,” he said.
Exporters are struggling as a result of disruptions in the international supply chain caused by the pandemic.
Freight expenses have jumped to $13,000-$14,000 each container from $5,000 before the epidemic, according to Maheshwor Shrestha, CEO of Everest Fashion, which exports Nepali felt products to the international market.
“Just a few days ago, the transportation cost per container reached $30,000.” “Air cargo rates have also increased by over thrice,” he noted.
“The increase in shipping costs is a significant blow to exporters like us.” We lose customers since buyers are unable to purchase the goods, resulting in a drop in sales,” he explained. “It puts financial strain on exporters who took out bank loans to make the items and intend to repay them once the commodities are sold.”
“Shipments have dropped by more than 20%,” Shrestha noted.
Freight costs have climbed threefold since the pandemic, according to Dharma Raj Shakya, past president of the Nepal Handicraft Association.
With the rise in prices, exporters are facing double problems sourcing raw materials and exporting finished goods, as most of the raw materials required to create handmade goods are imported.
“The cost of production has risen as raw material costs have risen. In addition, higher labor costs and transportation costs have increased the cost of Nepali handicrafts by 20-25 percent “Shakya remarked. “As a result, demand for Nepali handicrafts in the foreign market is dropping since they are unable to compete on price,” he said.
Handicraft entrepreneurs, according to Shakya, are receiving less orders from the overseas market.
In the fourth month of 2021-22, year-on-year consumer price inflation was 5.32 percent, up from 4.05 percent the previous year. According to Nepal Rastra Bank, food and beverage inflation was 4.79 percent in the review month, while non-food and service inflation was 5.73 percent.
According to the World Trade Organisation, supply chain interruptions, shortages of production inputs, and growing Covid-19 instances slowed trade growth in the third quarter of 2021, resulting in a 0.8 percent drop in global merchandise trade volume.
“In Asia, seasonally adjusted exports fell by 1.2 percent in the third quarter, while imports fell by 1.3 percent,” according to a study released on Monday.
Higher transportation expenses, according to the United Nations Conference on Trade and Development (UNCTAD), will raise the cost of goods in the coming year.
According to a UNCTAD assessment released on November 18, a global jump in container shipping costs could hike consumer prices in LDCs by 2.2 percent over the following year, based on an 8.7% increase in import prices.
According to the report, container freight costs soared due to a surge in demand for freight transportation, a shortage of shipping containers, and restricted capacity and congestion at ports, with the impact being disproportionately felt in smaller economies.