According to shipping market research firm Linerlytica, the maritime cargo congestion is spreading to Asia, with 60% of the ships waiting to dock in Asia.
Among them, Singapore’s container port (the world’s second largest port) is in a state of serious congestion, the worst since the COVID-19 pandemic.
Severe congestion
The Maritime and Port Authority of Singapore (MPA) said in late May that the average waiting time for container ships to dock at Singapore ports is 2-3 days, while it is usually less than a day.
However, wait times can be up to a week, according to data from Linerlytica and real-time shipping data provider PortCast.
Mr. NMK, a representative of a shipping company, said that currently it is very difficult to find ships to transport abroad – in addition to high freight rates, there is also a shortage of ships.
There are many reasons for this, but mainly because of activities related to goods services from abroad. Currently, freight rates are 60%-70% higher than at the beginning of the year.
“Many containers are backlogged at the port and cannot be shipped. The cause of this congestion is partly due to ships sailing towards China to focus on exporting goods to the US before August 1, to avoid being imposed anti-dumping duties by the US. That leads to congestion at ports in Singapore and China, causing a shortage of ships in many places, pushing up freight rates” – Mr. K. said.
The ship docked at Cat Lat port (HCMC) to load and unload import and export goods. Photo: HOANG TRIEU
Mr. Dang Dinh Long, General Director of Mega A Logistics Company (HCMC), informed that the situation of shipping to Vietnam’s key export markets is very tense. The most serious is the shipping route to Europe, where the freight is both expensive and there are no seats available.
“Enterprises that have transportation contracts will have space but must accept high freight rates. Businesses that do not have a contract, even if they accept higher rates, still have to wait a long time to be transported” – Mr. Long said.
Currently, the freight price for this route is about 8,200 USD/40-foot container – an increase of 2 times compared to the end of 2023. Similarly, other routes such as America, India, Middle East, and South Asia also increased rates very strongly.
In the new market, India, freight rates increased more than 3 times in just 8 months, from 900 – 1,000 USD to 3,500 USD/40-foot container and from 700 USD to 2,500 USD/20-foot container.
“For exports to China alone, shipping lines continue to waive freight and only charge local fees because they want to absorb empty containers to serve Chinese exporters,” said Mr. Long.
Also according to Mr. Long, in the past, Vietnamese enterprises mainly exported to the departure port (FOB) and imported at the destination port (CIF), so they paid little attention to shipping costs because their partners worried. However, currently, Vietnamese enterprises are switching to exporting in the form of CIF, so recent developments in shipping rates have greatly affected enterprises in the industry.
Unreasonable increase in fares
Mr. Phan Minh Thong, General Director of Phuc Sinh Joint Stock Company (HCMC, specializing in exporting agricultural products), said that each month the company exports 400 – 600 containers under CIF form, so it suffers huge losses when shipping costs increase.
“Previously, the export freight rate to the US was only 2,700 USD/container, we used this rate to sell goods, but now it has increased to 8,000 USD/container, which means the additional monthly payment is extremely large. The shipping lines have increased the freight rate unreasonably.
During the COVID-19 pandemic, many shipping lines organized new construction, increased the number of empty containers but then withdrew them, creating scarcity to increase prices and profit. Although we exported a large volume of output, we had no right to negotiate with shipping lines. We could only agree to their new policy to be transported, otherwise we would have to leave the goods behind,” Mr. Thong said indignantly.
For wooden furniture exporting enterprises, the high increase in sea freight rates in recent times has caused orders to stagnate, and some previously negotiated contracts have also been interrupted, as customers have temporarily stopped importing to wait for sea freight rates to decrease, as well as to seek more effective solutions.
According to Mr. Nguyen Chanh Phuong, Vice President of the Handicraft and Wood Industry Association of Ho Chi Minh City (HAWA), the tense situation in the Red Sea forced shipping lines to change their routes, leading to congestion at Singapore port and neighboring ports in the Southeast Asian region. Waiting time for goods to be picked up was three times longer than usual, causing a shortage of ships and containers waiting at the yard for longer periods.
In addition, the US’s plan to impose a 25% – 100% tax on Chinese goods (batteries, electric vehicles, medical supplies, etc.) from August will force these businesses to speed up delivery or pre-book at high prices, which will also contribute to the increase in shipping costs. “Businesses are worried that shipping costs will continue to increase even higher than during the pandemic,” said Mr. Phuong.
For many textile and garment enterprises, the good news at this point is that export orders have recovered, many enterprises have orders until September, even until the end of the year, enough for the enterprises to operate stably. However, besides that good news, enterprises are struggling with the problem of cost to ensure production and business efficiency.
Mr. Pham Van Viet, Chairman of the Board of Directors of Viet Thang Jean Co., Ltd., said: “International logistics and transportation costs have increased so high that export costs have also increased 3-4 times compared to 2023.
From March 2024, partners have agreed to increase export costs by 5%, but this increase is too small and not enough to compensate businesses. More importantly, increased export costs are also accompanied by extended delivery times, slow cash flow, etc., making it very difficult for businesses.
Proactively negotiate with partners
Faced with this situation, Mr. Phan Minh Thong proposed that state management agencies need to work with shipping companies so that they do not increase rates without cause.
“Vietnam has a long coastline, is a major transportation hub, and generates billions of dollars in profits for shipping lines, so there must be management based on the harmony of interests of all parties. More than 10 years ago, shipping lines only had freight rates, but now there are many other types of fees that are being levied on businesses,” said Mr. Thong.
According to the Vietnam Timber and Forest Products Association, high freight rates have affected all export goods, not just the wood industry.
However, wood exporting enterprises are familiar with the events happening in the world, including the continuous fluctuations in shipping rates, so they and their partners have sought the most suitable solution.
“Normally domestic enterprises export goods in FOB format, customers take care of hiring ships themselves. When there is a transportation incident, both sides negotiate to share the costs incurred” – a representative of this association informed.
Ho Chi Minh City Department of Industry and Trade recommends that import-export businesses be flexible, adapt to the situation and have temporary solutions to ensure smooth production, business and export.
Businesses need to continue to closely monitor the situation and developments in the Red Sea, thereby proactively making appropriate plans and discussing with purchasing partners; In case of necessity, the time for packing and delivering goods can be extended. Enterprises also need to promote the search for new export markets to reduce dependence on certain markets.
A temporary solution is for businesses to cooperate to share transportation costs, negotiate better freight rates with shipping lines; promote the application of effective logistics solutions, and take advantage of government support policies to minimize the impact of rising sea freight rates.
The Vietnam Maritime Administration also forecasts that the shipping market will still have many complicated developments, so it recommends that import-export businesses need to proactively plan production and transportation plans, and ensure the signing of long-term contracts to Limit the impact due to price fluctuations.
“According to Mr. Phan Minh Thong, because they cannot negotiate with shipping lines, businesses can only negotiate with buyers to share shipping costs, but exporting businesses still have to bear the majority.
Closely monitor port service prices
The Vietnam Maritime Administration has issued a document directing maritime port authorities and maritime sub-departments to strengthen the monitoring of service prices at seaports and surcharges on container shipping services by sea; speed up the clearance of goods at ports, reduce administrative procedures and create favorable conditions for cargo ships and boats passing through seaports.
According to NLĐ
