(VAN) Sea freight rates suddenly skyrocketed and fluctuated daily, causing import-export businesses to face many difficulties as costs increased, not to mention delivery delays.
Loading and unloading goods at Phu My port, Ba Ria-Vung Tau province. Photo: Q.Dinh
The freight price for a 40-foot container in March was USD 2,900; by June, it had reached USD 7,300, more than doubling due to a lack of empty containers and many other reasons.
Sea freight rates increase every day
“Just in the past month, the cost of the company’s fruit exports to the US has increased by 60-70%. Frozen goods to Europe have increased even more,” a representative of a fruit export business in the Mekong Delta shared.
According to this person, it is the harvest season for some essential fruits, and orders are always guaranteed. Still, export transportation prices have increased too high, affecting the enterprise’s production, business activities, and profits.
Shipping rates fluctuate every day. Shipping lines quote prices weekly, no longer than before, from 15 days to 1 month. In June 2024, freight rates for international multi-trip trains increased by 100% compared to the previous three months. In particular, train fares to the US more than doubled. A 40-foot container in March was USD 2,950 but has now increased to USD 7,350.
Mr. Phan Dinh Quan, director of EZ Shipping Logistics Co., Ltd. (Hanoi), said that many businesses in the agricultural export transport industry are “seasick” because of Vietnam’s export activities to other markets. Big markets like the US, EU, etc., depend on foreign shipping lines.
According to Mr. Quan, the increase in shipping freight rates is a memorable milestone every year. For example, in 2021, shipping rates increased due to the COVID-19 epidemic and a lack of empty containers. By 2022, freight rates will increase due to the impact of the war in Russia and Ukraine. In early 2024, shipping rates will be affected by Red Sea tensions.
“Transportation costs currently account for over 15% of product costs. But all empty containers are concentrated in China due to higher costs than other countries, so it is predicted that shortly there will be a shortage of empty containers in Vietnam, pushing Ship freight prices to increase,” Mr. Quan expressed concern.
Find ways to deal with train fares
According to logistics businesses, the cause of freight rates is the impact of the ongoing Red Sea crisis in the Panama Canal and signs of escalation in the US-China trade war.
The US plans to impose substantial tariffs on many Chinese goods starting next August, causing this country’s exporters to boost exports ahead of schedule. Usually, every year, from July, Chinese goods are pushed to Europe to meet Christmas and New Year orders.
Signs of escalation have appeared when the US plans to impose tariffs on many Chinese products, including electric vehicles, battery components, solar cells, etc. Therefore, many Chinese exporters are paying higher prices to secure a seat on ships going to the US and Europe, and they are even willing to pay up to USD 1,000 for a slot on the boat, while Vietnam only pays USD 600.
Increased demand and limited capacity could lead to higher rates and increased delays. However, according to many Vietnamese logistics businesses, shipping freight prices are unpredictable but may not reach extreme levels like during the COVID-19 pandemic.
Many export businesses are looking for ways to reduce ship freight costs. In particular, the option is to find a temporary replacement supplier without the risk of losing orders so as not to incur a high temporary cost in terms of freight rates.
Mr. Phan Dinh Quan said that some businesses exporting fruits and agricultural products plan to ship goods by plane or may have to temporarily suspend exports for less important orders or ask to extend delivery time.
According to data from the international logistics exchange Phaata, freight rates from Ho Chi Minh City to the US are increasing sharply. Meanwhile, Drewry’s world container index increased 12% to USD 4,716 per 40-foot container from May 30 to June 6 and increased 181% over the same period last year.
From Shanghai to Genoa, rates increased by 17% to USD 6,664 per 40-foot container. Freight rates from Shanghai to New York increased 6% to USD 7,214 per 40-foot container.
Rerouting ships from the Red Sea via the Cape of Good Hope has caused capacity shortages, port congestion, and demand, contributing to a sudden increase in spot container shipping prices on major routes.
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