Many export businesses reflect that they are facing a new increase in shipping rates no less than the container shortage crisis during the COVID-19 pandemic. Increased fees reduce business profits, but the biggest concern today is not being able to compete with competitors.

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 no less than the crisis of container shortage during the COVID-19 pandemic.

Reduce corporate profits, lose competitive advantage

According to the Vietnam Association of Seafood Exporters and Producers (VASEP), the world's vital shipping routes from the Red Sea to the Gulf of Aden are heavily affected by the escalating geopolitical conflict in the Middle East.

For some time now, the Mandab Strait - one of the busiest maritime routes in the world with the capacity to handle about 15% of global maritime trade value - has been significantly disrupted; due to attacks by Houthi rebels on cargo ships in recent times. The majority of cargo ships still avoid moving into the Red Sea area, with the number of daily movements down by two-thirds compared to the same period last year.

The drought situation in the Panama Canal - which handles 5% of the value of global maritime trade - gradually improved as the number of daily shipments increased. However, shipping capacity through the Panama Canal remains below the usual daily average of 34 - 40 transits and cargo traffic is expected to return by 2025.

Recently, “there was congestion again in Singapore, leading to concerns about a supply chain crisis and increased commodity prices. Congestion in Singapore stems from many factors; from the trend of changing shipping routes when the Red Sea is unstable to the rush to transport goods before the new tariffs imposed by the US on Chinese goods take effect," VASEP said.

Sharing with VnBusiness, Mr. Ho Quoc Luc, Chairman of the Board of Directors of Sao Ta Food Joint Stock Company, said that for sea freight to North America and Western Europe; price increase 100% compared to the off-peak period, while prices for routes to Japan, Korea, and Australia are more stable.

"Increasing freight prices will reduce businesses' profits, but the biggest concern today is the market and price competition," Mr. Luc said. Specifically for the shrimp industry, Chairman Sao Ta said that Ecuadorian shrimp prices continue to decrease, causing domestic shrimp to decrease, farmers limiting stocking... which will lead to negative consequences for this industry from now until the end of the year.

According to the 21st week newsletter from the Vietnam Association of Agents, Brokers and Maritime Services; Limited supply due to the Red Sea diversion and demand trends in some regions have pushed peak season volumes to arrive early, leading to a spike in prices on the main East-West routes this month; reaching levels not seen since September 2022. The latest boom has taken place on most routes with spillovers reaching Latin America, Africa and intra-Asia.

According to many experts, this year started with a sudden change in trading patterns, leading to a limited fleet and currently leading to a shortage of containers. Congestion remains moderate at this time, although that could change as carriers/retailers scramble to book slots; Meanwhile, freight rates are currently at a record high except for the 2021 - 2022 period.

“A non-seasonal increase in shipping demand from Asia – driven by the potential start of a restocking cycle in Europe and the extension of peak buying demand by North American importers; due to concerns about labor disruptions or Red Sea disruptions later this year - is putting pressure on the container market, which is already stressed by the Red Sea transition," an expert commented.

Monitor shipping company surcharge increases

In the week of 21/2024, according to Xeneta data, freight rates from Asia to the West Coast of North America continued to increase sharply to 4,760 USD/FEU; equivalent to an increase of 5.31% compared to last week and an increase of 43.68% compared to last month.

Freight rates from Asia to Northern Europe continued to increase sharply to 4,677 USD/FEU, equivalent to an increase of 9.58% compared to last week and an increase of 46.06% compared to the previous month.

In Vietnam, some businesses reported that 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...

Meanwhile, Vietnamese businesses have almost no choice because in terms of international shipping, Vietnam's shipping fleet is currently only responsible for transporting about 10% of the market share, mainly transporting the following routes: China, Japan, Korea and Southeast Asia. Vietnam's export activities to major markets such as the US, EU... depend on foreign shipping lines.

According to a representative of Thong Nghe An Joint Stock Company, sea freight rates are currently increasing very high, half a month ago, from Hai Phong to India increased more than 2 times. There are very few places to run goods from Vietnam to India, while turpentine oil is dangerous and is a flammable and explosive liquid, so shipping lines limit accepting goods from businesses; Businesses have booked for many weeks but are still uncertain.

“In the past, the container imbalance fee (CIC) was borne by the importer, but now the shipper in Vietnam has to bear this cost. In addition, the serious shortage of container shells also significantly affects the export plans of businesses. According to the business's calculations, transportation costs currently account for over 15% of the product cost, and with the current situation, it will increase even higher" - this business representative shared.

Faced with the above situation, the Vietnam Maritime Administration has just requested the Maritime Port Authorities to coordinate with the Maritime Sub-Departments and competent agencies; Relevant associations and units strengthen supervision of shipping businesses; Providing container freight services by sea, listing prices and surcharges in addition to the price of container freight services by sea (prices and surcharges in addition to prices); Complying with the effectiveness of price postings and surcharges in addition to prices according to the provisions of Decree No. 146 of the Government.

Units are assigned to monitor and report to the Department when there is congestion at seaports, as well as when there is an imbalance in container containers serving import and export goods.

Vietnam Maritime Branch in Ho Chi Minh City is assigned to preside over and coordinate with the Maritime Branch in Hai Phong and Maritime Port Authorities in Ho Chi Minh City; Vung Tau; Hai Phong monitors statistical data on price increases/decreases and extra-price surcharges 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 increase/decrease and other related issues with shipping lines.

Source: VnBusiness