Before they could “recover” from a year of struggling business, few orders, and plummeting revenue and profits, at the beginning of 2024, export businesses had another headache because of skyrocketing sea freight rates.
Ocean freight rates skyrocket
Vina T&T Group exports dozens of containers of fresh fruit to the US and EU markets every week. Recently, tensions in the Red Sea have caused shipping costs to increase by 30-50%, increasing shipping times by about 15 days. This has greatly affected the quality of agricultural products.
Vietnam exports many goods to the US and Europe, so the impact from increased shipping rates is not small.
Vietnam exports many goods to the US and Europe, so the impact from increased shipping rates is not small.
According to information from Trung An High-Tech Agriculture Joint Stock Company (Can Tho), although the company’s rice output exported to the EU and the US is not much compared to Asian markets, the strong fluctuations in sea freight rates also have a significant impact on the business.
“Previously, the shipping fee for exporting rice to Europe was just under 1,000 USD/container, but now it has increased to 3,000 – 4,000 USD/container, the real difficulty falls on the shoulders of businesses,” said a representative of Trung An.
CEO of Vietnam National Textile and Garment Group (Vinatex), Mr. Cao Huu Hieu said that enterprises in the Group are under pressure to increase input costs due to tensions in the Red Sea. While unit prices for export goods are unlikely to increase, orders are still on a downward trend in 2023 due to the impact of the global economic recession and tightening spending markets.
According to the Vietnam Maritime Administration, container shipping service prices from Asia to Europe and America fluctuated greatly in the first week of January 2024, increasing by about 60% compared to the end of 2023.
Currently, the price of shipping containers from Asia to Europe and America is about 88% higher than the price before the Covid-19 pandemic. Accordingly, the freight rate from Vietnam to ports in the West America region is 2,650 USD/40-foot container, to ports in the East America region is 3,900 USD/40-foot container, to Europe is 4,900 USD/40-foot container (according to the price quotes of some shipping lines).
What is worrying is that, in addition to increasing shipping prices, the shipping market has also seen cancellations and abandonments, with 78/650 routes canceled on the world’s main shipping routes (trans-Pacific, Atlantic, Asia – Northern Europe and Mediterranean) between the second week of January 2024 and mid-February 2024, accounting for 12%.
Normally, for the shipping route from Asia to Europe, the ship’s journey goes through the Red Sea and the Suez Canal. This is the shortest route with optimal cost. However, since the end of 2023, due to conflicts in the Red Sea area, 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 10 to 14 days longer than before, incurring a lot of additional shipping costs, which causes shipping prices to increase and container shortages to occur.
Currently, more than $200 billion worth of goods have moved out of the Suez Canal, which is an important global shipping route. The situation of high freight rates with no end in sight will put a burden on the links in the industry chain.
Request shipping support
Avoiding the Red Sea route, more and more cargo ships are choosing to go around Africa’s Cape of Good Hope, greatly lengthening journeys and increasing costs.
The diversion to bypass the Cape of Good Hope will add 1-2 weeks to the journey time for cargo ships. Ships traveling from Asia to Europe will take even longer.
To avoid delays, many companies turned to air freight, leading to a sharp increase in air freight rates.
Cargo volumes on a key route transporting fashion goods from Vietnam to Europe increased 62% in the week ending January 14, 2024, 6% higher than the peak week in October 2023, and 16% higher than a year ago, Xeneta data shows.
Goods transported on flights from Vietnam to Europe are mainly garments, and there has been a shift in the mode of transport from sea to air. This reality means that businesses will have more difficulty in paying additional costs, while the unit price of export goods does not increase.
Concerned about the high price of container shipping services to Europe and America, the Ministry of Transport has requested support for shipping container goods to Europe and America.
Accordingly, the ministry requested the state management agency specializing in maritime to preside over and coordinate with relevant agencies and units to ensure a smooth seaport system nationwide, creating favorable conditions for the transportation of import and export goods; at the same time, research and immediately implement solutions to improve the efficiency of exploiting maritime infrastructure.
“The Maritime Administration is responsible for speeding up the procedures for entering and exiting ports and loading and unloading goods for ships transporting import and export goods, especially containers to America and Europe. At the same time, urgently work with shipping lines with routes to America and Europe to call for and attract shipping lines to maintain routes, add seats and containers to Vietnam, in order to meet the demand for freight transport,” the Ministry of Transport requested.
