Shipping rates have increased by 50-70% as tensions in the Red Sea escalate, causing businesses to worry and demand sanctions against shipping lines that take advantage of the fee hikes.
The Suez Canal is one of the most important shipping routes, accounting for about 12% of total global maritime traffic. Since late 2023, due to conflicts in the Red Sea region, many shipping lines have had to change routes, not going through the Suez Canal but going around the Cape of Good Hope, causing the ship's journey to be extended by 10-15 days.
At a meeting to discuss solutions to difficulties for export enterprises on February 6, Mr. Tran Thanh Hai, Deputy Director of the Import-Export Department (Ministry of Industry and Trade) said that the immediate negative impact is the increase in freight rates. More seriously, according to him, the shortage of empty containers and the long transportation time affect the ability to meet import-export orders.
Data from the Vietnam Maritime Administration (Ministry of Transport) shows that container shipping rates by sea to the US and Canada increased by 55-73% compared to the end of 2023. Rates to Europe alone increased by 3-4 times, to 4,350 - 4,450 USD per container.
Along with rising costs, some major shipping lines have imposed additional peak season surcharges, further straining the costs of shippers. "In cases where Vietnamese shippers are not the ones negotiating the shipping contract, the imposition of unannounced and high fees makes things more difficult for them," Mr. Hai said.
Mr. Tran Thanh Hai, Deputy Director of the Import-Export Department (Ministry of Industry and Trade) talks about the impact of the Red Sea tension on Vietnam's import and export, February 6. Photo: Ministry of Industry and Trade
Difficulties in skyrocketing freight rates and shipping lines imposing additional surcharges without notice have also been reported by businesses. Ms. Hoang Thi Lien, President of the Vietnam Pepper Association (VPA), said that a business loaded goods onto the ship on December 20, 2023, but 15 days after the goods were loaded onto the ship, the company announced an additional charge of 2,000 USD per container. Meanwhile, each container of pepper contains 22 tons and cinnamon contains 20 tons but the value is low, about 1,000-1,200 USD. That is, the additional fee charged by the shipping line is twice the value of the goods.
Ms. Lien said that the surcharges applied by shipping lines include port handling surcharge (THC), seal fee, and delivery electricity. Shipping lines also request that late payment penalties for these surcharges will be applied one week after the announcement.
In response to businesses' concerns, Mr. Le Quang Trung, Vice President of the Vietnam Logistics Services Association (VLA), admitted that there was a situation where shipping companies were "fishing in troubled waters", taking advantage of the situation and objective factors to push up freight rates. Therefore, Mr. Trung said that authorities need to issue policies and sanctions to manage prices, fees, and surcharges.
Sharing the same view, business representatives also recommended that management agencies review the shipping line's regulation of posting prices 15 days in advance, so that they can proactively respond.
"Contracts for the spice industry are signed for very short periods, about 2-3 months in advance. Businesses do not dare to risk signing contracts earlier. Therefore, the impact of adjusting shipping prices is a huge burden," Ms. Lien said.
Loading and unloading goods at Tan Vu port, Hai Phong, July 2023. Photo: Giang Huy
Textiles and garments - one of Vietnam's billion-dollar export items - have not yet been directly affected as most orders are FOB, meaning the buyer bears the shipping costs. However, Mr. Truong Van Cam, Vice President of the Vietnam Textile and Apparel Association (Vitas), is concerned that if the Red Sea tensions continue, new orders will be asked to increase costs to cover shipping costs. At that time, Mr. Cam said that requiring shipping lines to provide transparent information about freight rates, increased fees and surcharges will be the basis for businesses to renegotiate rates with customers.
Mr. Ngo Khac Le, Vietnam Association of Shipping Agents and Brokers (VISABA), proposed to amend the decree on the Law on Prices, according to which, shipping lines must declare the price of transportation services.
On the management side, representatives of the Import-Export Department and the Vietnam Maritime Administration requested shipping lines to comply with regulations on freight rates and not impose unfounded fees and surcharges. At the same time, shipping lines need to maintain and add more ships and empty containers to ensure schedules and import-export needs.
Speaking more about response solutions, VLA Vice President Le Quang Trung said that relevant ministries and sectors need to update information. Enterprises should proactively add conditions on risk exemption, insurance, and change delivery time in commercial and transportation contracts.
At the same time, according to Mr. Trung, exporters should choose an alternative option, instead of shipping goods by sea through the Suez Canal, they can switch to air or rail transport.
In the long term, Vietnam needs to consider building long-distance container routes and airlines to transport goods under its own brand. Because currently, imported goods depend almost entirely on 10 foreign shipping lines, while domestic companies mainly operate intra-Asia routes.
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