Another alert for Bangladesh RMG exports as shippers suspend operations on Suez Canal

Bangladesh, which relies heavily on garments exports, is facing another round of worries after operations by major shippers on the Suez Canal – a primary route to Europe – was suspended following a missile attack on a vessel. 

Earlier on 15 December, a Liberian-flagged vessel "MSC Palatium III", en route from Mombasa to Jeddah, fell victim to a missile attack on the Red Sea allegedly by Houthi militants in Yemen's Bab al-Mandab Strait. 

The incident led to ships suspending passage on the Suez Canal route, which sent major shipping companies – MSC, Hepag Lloyd, and CMA CGM – scrambling for alternate routes.

Four of the world's five largest container-shipping companies have paused or suspended their services in the Red Sea since.

For Bangladeshi exports of apparel products – reaching over $46.99 billion in the fiscal year 2023 – the Suez Canal acts as a gateway to Europe, which accounts for 51% of overall trade.

The disruption means timely transportation will be made even more difficult.

Syed Nazrul Islam, the first vice president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), highlighted that an alternative route would inevitably result in delays in shipping Bangladesh's garment products to Europe. 

"Furthermore, the additional transportation costs will likely be borne by the buyers, adding financial strain to an already challenging situation," he added.

The surge in fuel costs is expected to contribute to an increase in freight charges.

Bab al-Mandab serves as a crucial route for global seaborne commodity shipments, especially for crude oil and fuel from the Gulf. 

Alternative routes will result in a minimum seven-day delay and an additional fuel cost of up to $10,000.

Chairman of the Bangladesh Shipping Agents Association Syed Mohammad Arif emphasised the already precarious state of global trade due to the Russia-Ukraine war. 

"The closure of the Suez Canal amid the Israel-Palestine conflict adds another layer of complexity, leading to increased fuel costs and consequently, higher freight charges," he said.

Major shipping companies, including the CMA CGM and AP Moller-Maersk, have taken proactive measures by rerouting their vessels away from the Red Sea region until further notice. 

As nations grapple with the geopolitical landscape and its impact on global trade routes, the missile attack in the Red Sea serves as a stark reminder of the fragility of the interconnected shipping network and the potential far-reaching consequences for economies worldwide.