Container freight rates continue to rise sharply
Sharing at the forum "Connecting supply and demand of crop products in the context of Covid-19 prevention and control" taking place on the afternoon of July 29, Mr. Nguyen Dinh Tung - General Director of Vina T&T Import-Export Company - The freight rate for shipping containers to the US is currently $9,600/container (40 feet), an increase of 5 times compared to the time before the epidemic. Even logistics costs to Ho Chi Minh City. New York peaked at 18,000 - 19,000 USD/container, 10 times higher than before the epidemic.
Logistics operation is one of the topics discussed at the 40th ASEAN-Japan Center Board of Directors meeting.
All these additional costs will be included in the cost, affecting the competitiveness of the product. The current shortcoming is the lack of empty containers. However, in fact, there are still many imported containers at ports because importers are shutting down or operating in moderation. This makes the amount of excess containers still a lot while exporting enterprises are seriously lacking. Therefore, it is necessary to have measures to negotiate with shipping lines and restrain logistics rates.
Besides logistics costs, Tung said that the application of "curfew time" in the southern provinces also affects the harvesting, processing and export time of fruits. Normally, the company harvests fruit at around 4am - 6.30am, then delivers the goods for preliminary processing until about 10pm and the output reaches about 100 tons. However, currently, according to regulations, workers can go out at 6am to harvest and must return home before 6pm. This causes work efficiency and factory capacity to decrease sharply, only by 20-30% compared to before.
While in particular, fresh fruits must be handled immediately after being harvested. If before, businesses could process and export several containers of fruit every day, but now it takes many days to fill one container, incurring a lot of extra costs and greatly affecting the quality of fruit.
Transportation between localities in the southern provinces has been temporarily removed, however, the business side is concerned that the upcoming production harvest will face many difficulties. Many places do not accept "3 places" even though businesses commit to "1 road, 2 places". Meanwhile, for many agricultural products, harvesting agricultural products requires expertise, not everyone can do it, coconut is an example.
With the same opinion, Ms. Ngo Tuong Vy - Deputy Director of Chanh Thu Fruit Import-Export Co., Ltd - said that logistics charges are out of control of enterprises and also a difficult problem for businesses. fruit export. Logistics prices skyrocketed, export businesses are struggling with themselves about whether to continue or stop. Because agricultural products are of great value, if safety is not ensured, the loss of businesses will also multiply many times.
Not only fruit industry businesses are affected, seafood businesses, wood industry also "cry to heaven" because from the beginning of June 2021 up to now, the price of container shipping to the US has increased week by week. For refrigerated containers, if April 2021 is only about 7,500 USD, in the first week of July 2021, the freight has almost doubled, to 13,000 - 14,000 USD/container. Currently, the shipping cost of a 40-foot container to the US has reached $20,000. While before about 2 months, the freight rate was only 8,000 USD/container.
Not only the US leg, container freight rates on service routes from Vietnam to the EU also increased rapidly. Compared to April 2021, the freight of a container to some seaports in Russia has increased to $5,000-6,000, reaching $15,000/40-foot container. High freight rates, making it increasingly difficult to book seats on ships made the export of goods of many businesses plummet.
Fear of losing export markets
According to the Vietnam Pepper Association, the increase in sea freight rates is a very serious issue that negatively affects the pepper export situation. and no roadmap makes exporting enterprises face many difficulties and challenges. Shipping rates are too high, leading to exporters losing the market to our direct competitors.
Specifically, recently, the US and EU have turned to buying pepper from Brazil because the quality of pepper is not too different from that of Vietnam and most importantly, the cost of transporting from Brazil to the US is only 1/3. from Vietnam and from Brazil to the EU is only 1/10 of that from Vietnam. With a continuous increase in freight rates and no downward trend as at present, Vietnam's pepper industry will completely lose its competitiveness in the US and EU markets and so on, Vietnamese agricultural products will go where? The risk of losing key markets to competitors is very urgent.
Sharing the same opinion on this issue, Mr. Nguyen Dinh Tung said that exporting enterprises are struggling should continue or stop? If going forward, the cost is too high, the business is not profitable ups and downs, even losses. Meanwhile, if stopped, social security for employees will not be available, while export orders will be affected and thus enterprises will lose export markets to foreign competitors. "Our main export market is the US, if we stop or limit fruit exports, our partners will switch to buying from Thailand...", Mr. Nguyen Dinh Tung said.
Sharing the same view, Ms. Ngo Tuong Vy said that it is necessary to have an electronic information channel to update weekly freight costs for businesses to capture and control logistics costs. In addition, transport businesses will support import-export businesses, not taking advantage of opportunities to make profits during this difficult period.
Facing the above-mentioned difficulties, the Vietnam Pepper Association proposed the relevant ministries, branches and associations to report to the Prime Minister to work with shipping lines, consider finding ways to solve the "problem". lack of containers, lack of space” and bring the freight rates back to the way they were before. At the same time, the impact requires carriers to publicly and transparently transport freight rates on the company's official website, publish a clear fee schedule, avoid the current price disturbance, stop the current the image of shipping agents abusing their power to "oppress" businesses.
According to experts, the root cause of the "galloping" price rise is due to the impact of the Covid-19 epidemic. How long the freight rates will increase depends on how far the countries deal with the epidemic. In the context that more than 90% of Vietnam's export goods still depend on foreign shipping lines, in the face of high container freight rates, it is difficult to book seats on ships, proactively restricting exports to the US, shipping to other markets such as: Korea, Japan, England... for easier circulation of goods. In addition, many businesses also limit the signing of long-term contracts and increase seasonal contracts to avoid the risk of price escalation, which is recommended by experts.