War risk, freight surge cloud trade outlook

KARACHI: Industry stakeholders have expressed mixed views on supply chain risks linked to imported raw materials following the imposition of an illegal war by the US-Israel on Iran, with some saying there is no immediate threat of shortages due to adequate inventories but warning that soaring freight and war risk charges pose a serious challenge for future trade.

Commodity traders, however, claim that many of their members have temporarily suspended import and export activities until freight and war risk premiums stabilise.

President of the Pakistan Pharmaceutical Manufacturers Association (PPMA) Tauqeer-ul-Haq said the pharmaceutical industry faced no serious supply disruption as most of its raw materials were imported from China. He added that the sector typically maintains raw material inventories sufficient for five to six months.

Jawed Bilwani, a representative of the value-added textile sector and former chairman of the Pakistan Hosiery Manufacturers Association (PHMA), said the industry also sourced a significant share of raw materials from China. However, he noted that freight rates had surged by more than 100 per cent, while a Rs55 per litre increase in diesel prices had pushed up transportation costs.

The value-added sector usually maintains raw material stocks for two to three months and places fresh import orders when stocks fall to around one month, he said. Industries holding only one month’s inventory could face difficulties if they delay reordering due to high freight costs.

To reduce the cost of doing business, Mr Bilwani urged the government to cut motorway and highway toll rates by 50pc, offer freight subsidies to exporters, facilitate import shipments from China through land routes, ensure uniform terminal operator charges and abolish taxes on fuel prices.

President of the North Karachi Association of Trade and Industry (NKATI) Faisal Moiz Khan said the escalating conflict had severely disrupted shipping via the Strait of Hormuz, through which around 80pc of Pakistan’s crude oil imports transit. Combined with the Red Sea crisis, this has halted or rerouted shipping, pushed up global oil prices and driven freight costs higher.

He warned that delays could emerge in imports of chemicals, fertilisers, polymers and other........

© Dawn Business