Export businesses face difficulties as sea freight rates rise

DNHN - Logistics costs have now increased by about 130% compared to the end of 2023. This reality has been pushing domestic export businesses into a state of freezing many export orders.

Shipping rates from Vietnam to other countries are now approximately the same as during the COVID period

According to the General Statistics Office, in the first six months of 2024, the total import-export value of the country reached 369.62 billion USD, an increase of 16% compared to the same period last year. Of which, export value reached 190.73 billion USD, up 14.9%; import value reached 178.88 billion USD, up 17.3%. The trade balance is estimated to have a trade surplus of 11.85 billion USD.

However, just as the strong recovery in export growth brought joy, Mr. Ngo Sy Hoai, Vice Chairman and General Secretary of the Vietnam Timber and Forest Products Association (Viforest), mentioned that recently, businesses seem to be troubled by the sudden spike in sea freight rates.

Currently, according to feedback from businesses, sea freight rates to some distant markets like the US and EU have increased to 7,000-8,000 USD, whereas just a month ago, they were at 3,000-4,000 USD. Such rapid price increases cause significant difficulties for businesses across various industries, including the wood industry, as they heavily rely on exports. When freight rates increase, foreign importers must negotiate with us to adjust prices, thus we also bear the pressure of sharing risks due to the increased freight costs. This causes losses for Vietnamese businesses," Mr. Hoai commented.

Due to the strong impact of recent geopolitical conflicts in the Middle East, logistics costs have now increased by about 130% compared to the end of 2023. This reality has been pushing domestic export businesses into a state of freezing many export orders.

Mr. Tran Thanh Hai, Deputy Director of the Import-Export Department (Ministry of Industry and Trade), stated: "Currently, congestion in the Red Sea is causing shipments to Europe and other distant markets to increase significantly. This creates a chain reaction, causing port congestion, affecting import and export activities."

According to market research firm Linerlytica, 60% of ships waiting to dock belong to the Asian region. Singapore's container port, the world's second-largest port, is experiencing the worst congestion since the COVID-19 pandemic, with nearly 0.5 million container ships waiting to enter or leave the port.

Mr. Le Quang Trung, Vice President of the Vietnam Logistics Business Association (VLA) cum Deputy General Director of the Vietnam Maritime Corporation, shared: "In the past six months, logistics costs, especially sea freight, have increased significantly. The sea freight rates from Vietnam to Europe or the west coast of the US are now almost at COVID-era levels. Several factors contribute to the increased logistics costs and directly affect sea freight costs. Firstly, geopolitical issues and global conflicts, especially the Red Sea crisis, have forced major shipping lines to alter routes, increasing the distance by over 8,000 nautical miles and extending the travel time by 2-3 weeks. This directly impacts shipping schedules, delivery plans, and the quality of goods.

Moreover, market reactions to the US and EU adjusting tariffs have prompted some manufacturers to quickly import more goods to avoid higher tariffs. Consequently, the demand for transportation has increased for goods subject to these tariffs."

Also according to Mr. Trung, with transportation difficulties, some large global shipping companies have stopped transporting goods through the Red Sea and the Suez Canal.

For example, Shell has decided to stop transporting goods through the Red Sea. This decision is short-term, and Shell will evaluate whether the instability will continue. BP also temporarily stopped all shipments through the Red Sea; French shipping company CMA has removed all its ships from the conflict area until further notice; Hapag-Lloyd, which controls about 7% of the global container fleet, has also temporarily halted all ships through the Red Sea.

This situation has increased sea freight costs and caused delivery delays.

Efforts to reduce logistics costs require cooperation from multiple parties

Given this situation, Mr. Tran Thanh Hai informed that recently, functional agencies, the Vietnam Maritime Administration, and the Import-Export Department have exchanged and sent documents to associations, logistics companies, and import-export businesses. This represents shared efforts and cooperation among parties to enhance import-export activities. However, market fluctuations have affected costs. Therefore, cooperation from all parties, especially shipping lines, is necessary to carefully consider any fee increases.

According to Mr. Hai, some cost-sharing between shippers, exporters, and buyers, especially large-scale buyers, has already occurred.

"Furthermore, this is a temporary phenomenon that may pass, and businesses will gradually stabilize. Besides the freight rate increase, surcharges that Vietnamese businesses directly pay also pose an issue. Recently, functional agencies have worked with shipping lines to keep these surcharges within acceptable limits," Mr. Hai shared.

Mr. Le Quang Trung added that in the remaining months of the year, with the government's support and the efforts of global logistics associations, as well as close cooperation between logistics providers, transporters, and manufacturers, adjustments to sea freight rates specifically and logistics costs, in general, are trending towards stabilization.

From now until the end of the year, Mr. Trung expects that freight rates have reached their peak, and shipping lines are making efforts to stabilize them. Therefore, domestic businesses need to calculate appropriate schedules and timelines when planning to import and export goods.

Bao Bao