Shipowners benefitting little from taka depreciation

The devaluation of taka has increased competitiveness of Bangladesh's oceangoing ships but operators cannot take full advantage as they have to spend most of their revenue for fuel and other expenses to operate the vessels in international waters, sector people said.

The Bangladeshi currency lost over 28 percent of its value against the US dollar since January last year, which has created scope for the sea freighters to transport goods at lower rates.

All these are happening because of the exchange rate.

The exchange rate for the exporters is now Tk 110.5 for a dollar whereas they used to get roughly Tk 86 for every greenback in January 2022.

The higher rate of dollar is good for the ship operators, Mohd Mehrul Karim, CEO of SR Shipping, a concern of KSRM Group, told The Daily Star.

"But when it comes to investment, we also have to spend higher to get dollar and we become badly affected," he said.

The Chattogram-based group, which has a fleet of 25 bulk carriers, recently bought two bulk ships of 66,600 deadweight tonnage capacity and it is in the process of buying another three vessels.

"So, in terms of expenditure we are on the negative side," he said, but added that there would be some benefit for the depreciation of the taka against the dollar.

The official made the comments at a time when shipping freight rates have fallen globally amidst a slowdown in the world economy.

"The market is not really encouraging at present," Karim said.

Local value addition of oceangoing ships is very low, as they have to pay in dollars— except for Bangladeshi crews—to buy fuel and maintain other operational costs, said Md Jahangir Alam, chairman of MI Cement Factory Ltd.

MI Cement Factory operates three oceangoing ships, according to the data of the Bangladesh Ocean Going Ship Owners' Association (BOGSOA).

"Oil prices have gone up and we have to buy fuel at higher prices now than the past. So, a good portion of our freight earnings is spent abroad to bear the expenses," he said.

Alam said the oceangoing ship owners would benefit if the freight rates increase and oil prices falls. "We need both."

Earlier this week, Azam J Chowdhury, chairman of BOGSOA, which represents private sector ship owners, said there is very low possibility of seeing a further drop in the sea freight rates.

Rather overall freight rate may increase as the Suez Canal authorities may hike fee for ships passing the canal, he said.

The supply disruption caused by the Israel-Hamas conflict might fuel oil prices to rise further, he added.

He said the oceangoing ship owners are now one of the largest contributors of remittances for Bangladesh.

The devaluation of the taka helped the operators as their earnings in taka have increased at present compared to the past.

Bangladesh has nearly 100 oceangoing ships thanks to tax and VAT benefits that encouraged entrepreneurs to expand their capacity in recent years.