In June 2024, freight rates for international multi-trip trains increased by 100% compared to the previous 3 months. In particular, train fares to the US more than doubled. The freight price for a 40-foot container in March was 2,900 USD, by June it had reached 7,300 USD, more than doubling due to the lack of empty containers, the impact of the ongoing Red Sea crisis in the Panama Canal and signs of escalation in the US-China trade war.
Sea freight rates increase every day
After a price increase at the beginning of the year due to the maritime crisis in the Red Sea, export businesses have been facing a new increase in shipping rates. Businesses informed: the cost of a container shipped to the US from nearly 3,000 USD has now skyrocketed to nearly 7,400 USD; The highest peak season fee every year is about 300 USD/container, now the shipping line has announced an increase to 1,000 USD/container…
A representative of a business specializing in exporting seafood in Can Tho said that transportation costs currently account for over 15% of the product price. “Just over the past month, the company’s orders to the US have increased freight rates by 60-70%. Frozen goods to Europe have increased even more. Shipping freight increases every day, affecting production and business activities. enterprise’s profits,” this business said.
Many businesses are worried that when freight rates fluctuate sharply, shipping lines switch to weekly quotes instead of extending quotes from 15 days to 1 month as before, making it difficult for businesses to be proactive in calculating costs. “Some orders’ prices are so high that the business no longer makes much profit” – a business said.
Mr. Phan Dinh Quan – Director of EZ Shipping Logistics Co., Ltd. (Hanoi) said that many businesses in the agricultural export transportation industry are “seasick” because of Vietnam’s export activities to other markets. Big markets like the US, EU… all depend on foreign shipping lines.
In fact, from 2021 until now, every year sea freight rates have had major fluctuations affecting business operations. For example, in 2021, shipping rates increased because of the Covid-19 epidemic, and due to a lack of empty containers. By 2022, freight rates will increase due to the impact of the war in Russia and Ukraine. And in early 2024, shipping rates are affected by Red Sea tensions…
Information from the Vietnam Association of Seafood Exporters and Producers (VASEP) also said that freight rates increased sharply due to tensions in the Red Sea area, shipping lines had to change their schedules with extended time. from 7-10 days. This leads to longer turnaround times for ships, incurring more transportation costs.
Some transport lines even had to cut some weekly trips, leading to a lack of seats. “This could be a new challenge for seafood businesses in 2024. If tensions in the Red Sea region continue or escalate, it could lead to increased transportation costs and input product prices for Aquaculture and seafood processing increase, affecting the competitiveness and profits of the industry” – VASEP warned.
What do export businesses need to do?
According to logistics businesses, the reason for the impact on freight rates is from the impact of the ongoing Red Sea crisis in the Panama Canal and signs of escalation in the US-China trade war.
International express delivery company DHL has warned of the risk of a shortage of empty containers. The reason is that shipping companies have had to redirect container ships to follow longer shipping routes to avoid the Red Sea since Houthi rebels conducted attacks on commercial ships. This also means that containers are stuck in the oceans for longer periods of time, leaving a shortage of empty containers available at ports for packing. The shortage of empty containers was exacerbated when bad weather affected ports in China, Malaysia and Singapore.
Mr. Le Duy Hiep – Chairman of the Vietnam Logistics Services Business Association, analyzed: The tension in the Red Sea greatly affects Vietnam’s export orders by sea, especially orders exported to Europe. , because all orders going to Europe by sea go through the Suez Canal on the Red Sea. This is the general influence of goods traveling from Asia – Europe and vice versa, not just Vietnamese goods. However, with the openness of a large economy like Vietnam, this has a significant impact on Vietnam’s exports.
Currently, sea transport prices for Vietnamese exports to Europe have increased on average for 1 container of dry goods from 500-700 USD, for refrigerated goods to over 1,000 USD. Previously, goods going to Europe from Vietnam’s Cai Mep or Lach Huyen ports via the Suez Canal only took about 20 days. Due to conflicts in the Red Sea, ships had to change direction to go around the Cape of Good Hope in South Africa, causing transit time to last 10-14 days compared to going through the Suez Canal previously. This increases transportation costs, causing export businesses to pay higher freight rates.
To reduce the impact of transportation costs, Mr. Hiep said that businesses must save money at each stage to reduce costs. In case tensions in the Red Sea continue to persist, it is possible to take advantage of the Free Trade Agreement with the Eurasian Economic Union to transport goods from Vietnam to Europe.
In the context of container shipping prices by sea to European countries and the US tending to increase sharply, the world container index increased by 12% to 4,716 USD for 40′ containers last week, the Maritime Administration said. Vietnam has just issued a document requiring units to strengthen monitoring of prices and surcharges in addition to the price of container shipping services by sea.
The Vietnam Maritime Branch in Ho Chi Minh City is assigned to preside over and coordinate with the Maritime Branch in Hai Phong and the Maritime Port Authorities in Ho Chi Minh City, Vung Tau, and Hai Phong to monitor statistics on Increase/decrease in prices and surcharges in addition to prices for a number of shipping lines providing container shipping services to Europe and the US, including: Maersk, MSC, CMA- CGM, ONE, Hapag-Lloyd, Evergreen , HMM, COSCO, Yang Ming, OOCL;
At the same time, proactively work with representatives of the above shipping lines in Vietnam and relevant units to grasp the causes of service price increases/decreases when there are signs of sharp increases/decreases and other related issues. to the shipping company.