Sea freight rates doubled, in some places up to 5-6 times
On February 1, speaking with Thanh Nien , Mr. Le Duy Toan, Director of Duy Anh Foods, said that the shipping cost of container goods to Europe has increased so rapidly that customers have complained. Accordingly, the quantity of goods and prices that customers order have also tightened. For example, the shipping cost to Germany used to be around 1,000 USD, but now it has increased to over 5,000 USD. Notably, shipping lines have announced that shipping costs will continue to increase since February due to insurance costs, ships taking longer detours, and increased costs.
Mr. Toan said that the company exports goods at FOB prices, so old orders do not have increased costs, but partners have had to pay too high additional freight, causing their orders to stagnate. Some potential customers have reduced their purchases and requested to renegotiate prices. "The unpredictable developments in the world have put both sellers and buyers in a dilemma. In a difficult context, businesses are trying to reduce their selling prices, offering the most competitive prices possible. If they reduce further, there will definitely be no profit, even a loss," Mr. Toan shared.
Sea freight rates continue to increase, import-export businesses face new difficulties
Similarly, some textile and garment exporting enterprises to European and African countries reported that some of their shipments have been "drifting at sea" for more than a month now because cargo ships have not dared to dock amid fighting in the Red Sea. "The goods have not arrived at the port, customers have not received them, which means they have not transferred payment to complete the old order and deposit for the new order. Meanwhile, we have finished preparing the raw materials for the new order," said a representative of Dony Garment Company (HCMC).
With agricultural products, many businesses are forced to export and share shipping costs with partners to maintain operations. At present, the transfer of coffee from the largest supplier, Vietnam, to the EU has encountered many difficulties due to tensions in the Red Sea. Many coffee exporting businesses said that export activities have been suspended because shipping costs have doubled or tripled compared to normal. Businesses have had to temporarily suspend exports and renegotiate shipping costs with partners on a 50/50 sharing basis.
Mr. Phan Minh Thong, Chairman of the Board of Directors of Phuc Sinh Group, compared the freight rates to markets in January compared to the end of 2023, which increased rapidly, with the lowest increase being double. Compared to a few months ago, some markets increased 5-6 times. For example, compared to the end of 2023, goods to the US increased from nearly 2,000 USD to 4,500 - 5,000 USD/container. Most notably, goods to the EU market increased sharply from 600 USD to 4,000 USD/container. "Every morning when I open my eyes, I see that all costs have increased, especially shipping costs," Mr. Thong lamented.
According to the Vietnam Association of Seafood Exporters and Producers (VASEP), the instability in the Red Sea has seriously affected the global supply chain, forcing shipping lines to reroute their routes. The shipping journey between Asia, Europe and the east coast of North America has become longer, pushing up freight rates, along with increased cargo insurance. "The new and big challenge for the global seafood trade this year is that shipping through both the Suez and Panama Canals is facing difficulties. There is a risk of goods being congested, there is a shortage of container ships and empty containers. This incident will affect the supply chain and risk making global inflation more serious," the VASEP representative emphasized.
Business difficulties on top of difficulties
Ms. Nguyen Thi Kim Huyen, Chairwoman and General Director of Global Maritime Services Company, a company operating in the field of logistics and freight forwarding, informed: In addition to the tension in the Red Sea causing shipping rates to the Americas and Europe to increase sharply, since mid-January until now, shipping routes in the Asia region have also increased prices. The most dangerous thing is that the market is experiencing a shortage of containers, especially refrigerated containers. This situation is likely to last until the end of the second quarter, creating great pressure on production, business and export activities of Vietnam as well as the world.
Mr. Tran Quoc Manh, Chairman of the Board of Directors of Sadaco Production and Trade Development Joint Stock Company in Ho Chi Minh City, added: Not only shipping rates but also insurance fees have increased too quickly and continuously. It is worth mentioning that there is a "domino effect" in shipping rates, not only routes to Europe and the US but most other shipping routes have increased fees because there are no empty containers to return. While wood is a less essential item, consumers are willing to cut spending when the economy is difficult, so orders that were already low have now continued to decrease. "Businesses can only accept paying higher fees, cutting down on profits that are already very thin. If possible, I just hope the government will study and support by reducing domestic freight service costs, especially port services," Mr. Manh suggested.
Faced with the above situation, the Maritime Administration (Ministry of Transport) recently sent a report to the Ministry of Transport, warning that container freight rates will continue to increase due to the possibility of conflict in the Middle East spreading. Although shipping lines have not officially reported on the shortage of containers like during the Covid-19 pandemic, the Maritime Administration also warned that the shortage of empty containers will directly affect the possibility of upcoming price increases.
This puts pressure on businesses when exporting previously signed orders, the product price will have to bear an additional cost, affecting the competitiveness of Vietnamese goods compared to other competitors in the region. The Maritime Administration forecasts that in 2024, import-export businesses will face the risk of increasing container freight rates, increasing transportation time, increasing booking orders, increasing order delays and increasing surcharges.
In this report, the Maritime Administration also said that it has assigned the Maritime Port Authorities of Hai Phong, Ho Chi Minh City, and Vung Tau to coordinate with maritime branches to work with shipping lines with routes to Europe and America to assess the situation, fluctuations in freight rates, the ability to provide ships, and especially to strengthen the supervision of the implementation of the listing of container freight service prices and surcharges of shipping lines in accordance with regulations.
Meanwhile, businesses operating in the logistics service sector reported that shipping lines have announced an increase in freight rates, effective from yesterday (February 1), an increase of 7-10% compared to early January. Logistics expert Nguyen Ly Truong An, Deputy Director of SeaAir Global Company, commented: "The tension in the Red Sea has caused market fluctuations, freight rates have increased 2-3 times, some routes may increase even higher. However, the logistics and maritime transport market is unlikely to fall into a state of disruption like during the Covid-19 period. However, businesses are still in the early stages of recovery, surrounded by difficulties, the increase in maritime transport rates and continuous increases are a "second blow". If health is weak, there will certainly be more businesses that give up the game at this time or live from hand to mouth, of course the ability to compete and recover will be weakened".
Production and business activities must operate and compete for each order. Vietnam does not have a shipping line to compete with international shipping lines. We are completely dependent on the world's shipping lines, so we are forced to follow whatever price they announce. Negotiations are generally just a formality, because the shipping lines themselves must accept the risks and buy large insurance premiums for the goods they transport. The problem is sharing costs, but these costs are too high...
Mr. Nguyen Ly Truong An, Deputy Director of SeaAir Global Company
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