It is difficult for exporters to negotiate selling prices when container rates increase

Enterprise export Worry about increased fees

Since mid-December 2023, tensions in the Red Sea have prolonged ship journeys and increased costs. Container shipping rates have also skyrocketed since then. As of February 15, the Drewery WCI global container freight index was at 3,732 USD/FEU (40-foot container), 3 times higher than the 3-year bottom in November 2023 of 1,384 USD/FEU.

Tensions in the Red Sea are having a major impact on Vietnam’s trade activities, especially export shipments import with Europe and North America because these are two regions accounting for 1/3 of the country’s trade value.

Along with increasing freight rates, some major shipping lines have applied additional peak season fees (Peak Season Surcharge), causing additional cost stress for shippers. When Vietnamese shippers are not the ones negotiating shipping contracts, the imposition of unannounced and high fees makes it difficult for them.

Credit rating agency Ind-Ra believes that this will be a big challenge for low value-added products due to low profit margins. While large companies can afford to absorb such large cost increases, delays and disruptions in the supply chain will be factors to keep in mind.

For medium-sized businesses, challenges appear on both sides, both cost and supply, and the capital working cycle is also affected.

Mr. Nguyen Hoai Nam, Deputy General Secretary of the Association of Seafood Exporters and Producers (VASEP), said businesses are concerned about the freight price situation. For containers of refrigerated goods exported to the West Coast of the United States, freight rates increased by 70% and to Europe even increased about 4 times. Shipping lines have even cut back on mother ships, making delivery times longer.

“We cannot predict how long the current situation will last to calculate costs into prices for future seafood export orders,” Mr. Nam said.

For the textile industry, the impact of increasing freight prices at the present time seems to be softer because businesses in the industry mainly export in FOB form, meaning customers bear shipping costs.

However, according to Mr. Truong Van Cam, General Secretary of the Vietnam Textile and Apparel Association, the signed orders may not be affected, but for future orders, customers will request to share costs to minimize losses.

In addition, because shipping times are extended, production time is limited for on-time delivery. This causes production pressure for businesses.

“We need to update the freight situation soon so that businesses can be proactive in negotiating orders. In addition, if shipping lines increase freight and surcharges, they also need to be transparent and informed in advance so that businesses can promptly respond in negotiating prices for orders,” Mr. Cam said.

Some businesses choose rail to transport goods. However, the Import-Export Department said this route is also facing difficulties as tensions between Russia and Ukraine are still ongoing.

The increase in fares is objective

From the perspective of transportation businesses, Mr. Le Quang Trung – Vice Chairman of Vietnam Logistics Business Association (VLA), Deputy General Director of Vietnam Maritime Corporation, said that transportation businesses themselves are also in a difficult situation. in a difficult position.

“Actually, cutting flights is extremely unfair because due to unsafe issues, they have to change schedules, cut flights, and transit time is extended. This not only affects export businesses but also affects them in ensuring their trade commitments. The price increase is also objective,” Mr. Trung said.

He said that export businesses need to determine that recent incidents are normal and have flexible response plans.

“Without Red Sea tensions, other problems would also arise that would increase freight rates. Businesses need to comply with the principles of supply and demand of the market,” Mr. Trung said.

However, he also admitted that some transport businesses have the phenomenon of “cloudy water” when freight rates increase. Some export businesses reported that some shipping lines automatically collected surcharges without 15 days’ notice as prescribed, forcing exporters into a “fish on the chopping board” situation.

To solve the current situation, Mr. Trung recommends businesses diversify transportation methods. For example, high-value goods can choose to go by air instead of going by sea. In addition, promote exploitation of Asian markets because currently shipping rates to this region only increase slightly by 10-15%.

Mr. Tran Thanh Hai, Deputy Director of the Import-Export Department, also said that businesses can choose to combine sea and air transportation to optimize time. Specifically, goods will be transported to Dubai and then transferred to Europe and the US by air.

According to VietnamBiz.vn