Sea freight costs from Vietnam to Europe or the US have increased dramatically, causing many businesses to spend tens of thousands of dollars more when exporting goods, resulting in a sharp decline in profits.
Recently, freight rates on key routes have increased significantly. At one point, the price per container to Europe was around $4,000-$5,000, more than double the price at the end of last year. Freight rates to the US increased similarly, reaching $6,000-$7,000 per container. Rates to nearby regions such as China, Japan, South Korea, and Southeast Asia also increased by $1,000-$2,000 per container.
This situation forces domestic export businesses to accept paying extra for each shipment before it leaves the sea, sadly watching their profits dwindle and facing the worry of struggling to compete with rivals.
It costs hundreds of thousands of USD extra each month.
Responding to a reporter, the leader of a fruit export company in Dong Nai said that since the beginning of the year, each export shipment has no longer been a source of complete joy for him. The reason is that while profits are nowhere to be seen, additional costs amount to hundreds of thousands of USD each month. He said his company exports nearly 100 shipments per month. Currently, freight costs for shipping goods to Europe have increased by about 2,500 USD/container, and to the US by 3,500 - 4,500 USD/container.
" Even with the cheapest option, an increase of $2,500 per container would still cost us an extra $250,000 per month compared to before. That's not including the additional costs arising from longer shipping routes amidst the impact of geopolitical conflicts on the maritime industry. Meanwhile, if we want to remain competitive, we can't adjust our prices accordingly, so businesses have to accept the losses ," he calculated.
Despite remaining concerns, Mr. Nguyen Dinh Tung, General Director of Vina T&T Group, expressed his delight that shipping rates have decreased in the past few days compared to previous days.
“ Last week, the shipping cost for a container from Vietnam to the US reached as high as $8,600-$8,700 per container, but this week it has dropped to around $6,000 per container. Although the price is still almost double the $3,500 per container at the end of 2023, it has helped businesses breathe a little easier ,” he shared.
According to Mr. Tung, the company exports 2-3 containers per day. This means each shipment costs an additional ten thousand USD. If the company cannot negotiate with its partners and has to sign a sales contract that includes shipping costs, this expense will fall on the company, creating significant difficulties.
Mr. Nguyen Van Kich, Chairman and General Director of Cafatex Seafood Joint Stock Company (Can Tho), a company specializing in exporting seafood to the US and Europe, also reported that Vietnamese businesses are struggling to bear the burden of sea freight costs. Each 40-foot container, holding 15-22 tons of goods, sees a price increase of nearly 100 million VND. " Many businesses are struggling to find ways to survive, such as seeking support from partners or shifting to new markets. But this is not easy; some businesses have had to consider limiting exports ," he said.
Containers are "selling like hotcakes," and even paying high prices makes it difficult to find space.
Mr. Kich stated that most Vietnamese export businesses are having to accept exorbitant sea freight rates due to a lack of alternative options, as container supply is extremely scarce. " Even with increased freight rates, securing space on a ship is fortunate; some companies don't even have room, meaning that even offering a high price doesn't guarantee booking a vessel. The reason is that the Chinese market has enormous demand, and they are willing to pay higher rates to secure space ," Mr. Kich said.
According to Ms. Ngo Tuong Vy, Director of Chanh Thu Company (Ben Tre), in recent years, sea freight rates have experienced significant increases each year, primarily due to a shortage of empty containers amidst the impact of COVID-19 or escalating political conflicts.
" Empty containers are all being shipped to China due to higher costs, so it is predicted that there will be a severe shortage of empty containers in Vietnam in the near future, pushing up shipping freight rates even further ," Ms. Vy predicted.
Sharing the same view, Mr. Dang Phuc Nguyen, General Secretary of the Vietnam Fruit and Vegetable Association, said that along with rising shipping costs, congestion at transshipment ports has disrupted the entire supply chain, especially for Vietnamese businesses' export goods, because Vietnam's exports to major markets such as the US and the EU... largely depend on foreign shipping companies.
Besides the ongoing conflicts in the Middle East, the increasing number of containers held and advance bookings by Chinese customers is causing sea freight rates to skyrocket. The demand for empty containers in China is very high due to its status as a major exporting nation. Therefore, Vietnamese businesses face significant challenges.
Meanwhile, Mr. Truong Quoc Hoe, General Secretary of the Vietnam Fisheries Association, said that Vietnam's export activities to major markets such as the US and the EU depend on foreign shipping companies. Therefore, it is difficult to avoid the phenomenon of some shipping companies taking advantage of the current shortage of ships to push up service fees.
“ When things get tough, they reduce the number of ships, causing shortages. This leads to even higher freight rates. Meanwhile, negotiating and discussing with shipping companies to ‘share’ the difficulties with export businesses is completely impossible at this time ,” Mr. Hoè said.
It is difficult to find an alternative route.
The Ministry of Industry and Trade recently recommended that export businesses should diversify their cargo routes and find alternative ways to reduce costs. For example, goods could be transported by sea to ports in the Middle East, and then further transported to Europe via air, rail, or road.
However, many believe this is not an easy task to accomplish.
Mr. Bach Khanh Nhut, Vice President of the Vietnam Cashew Association, analyzed: Traditionally, Vietnamese businesses sign contracts with partners several months before exporting goods to the European market. Therefore, the Ministry of Industry and Trade's recommendation is only appropriate in cases where businesses sign contracts for resale, seasonal trading, or when sea transport is not feasible due to excessively high costs, in which case businesses will choose alternative routes.
For example, cashew businesses typically sign contracts at least 3-4 months before the delivery date. During the contract signing process, the foreign buyer and seller assume responsibility for transportation, chartering ships, and leasing containers, and they designate the shipping company. In very few cases, we have the autonomy to choose our own shipping companies.
According to Mr. Nhut, a shipment of cashew nuts exported from Vietnam to the UK by sea, upon arrival at ports of various countries for customs clearance, is guaranteed by the businesses with the local authorities.
" If we follow the Ministry of Industry and Trade's recommendation to transport goods by sea to the Middle East and then transfer them by air, rail, or road to continue transport to Europe, it will involve passing through many ports and border crossings. What will the transit procedures be like then? Some countries might even open the goods for inspection. So who will be responsible for this? Whereas if we transport by sea, the shipping companies will be responsible for delivering and receiving goods with their partners and ensuring timely delivery ," Mr. Nhựt raised the issue.
Ms. Ngo Tuong Vy also expressed concern: Agricultural products have a limited shelf life when frozen, so sea transport, which takes about 30-40 days, is suitable. However, if businesses transport goods by sea to ports in the Middle East, and then use air, rail, or road transport to continue transporting them to Europe, the transit time could be extended by another 10-20 days.
" Not to mention that transporting goods from the Middle East to European countries by rail or road requires passing through border crossings and is subject to very strict controls, making the goods susceptible to damage ," Ms. Vy said.
Meanwhile, Mr. Nguyen Van Kich commented: " If businesses export to China, they can replace sea transport with land transport, but for businesses exporting to Europe or the US, there is no alternative to sea transport ."
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