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Ocean freight is constantly increasing

The prolonged disruption of the supply chain, leading to a shortage of empty containers in Asia is one of the reasons why shipping rates have skyrocketed since the pandemic broke out. The government and corporations are attempting to find a solution. It is difficult to forecast when the cost of chartering and freight rates will fall but they are unlikely to rise anymore.

The Logistician by The Logistician
25/03/2022
in Blog
Ocean freight is constantly increasing

Image: Thuy Mai

HIGHLIGHTS

  • Vessel turnaround time has increased by 20%-25% since the outbreak of the pandemic.
  • Container freight to Europe is up to 16,000-18,000 USD and the US is 22,000 USD.

FULL ARTICLES

Rates will remain high for the next 2-3 years

Congestion at key seaports in the US, Europe, and China has increased vessel turnaround time by 20%-25% since the outbreak of the pandemic. This has resulted in a shortage of ships and empty containers, pushing up freight rates. Meanwhile, the need for economic recovery after the pandemic makes the volume of container shipping globally expected to increase by 6%-8% per year. Therefore, many marine consulting organizations predict that this market will hold the current price level for the next 2-3 years.

Crisis of scarcity of ships and empty containers, pushing up freight rates
Crisis of scarcity of ships and empty containers, pushing up freight rates

Mr. Nguyen Xuan Chau, Chairman of the Board of Directors, General Director of Viet Long Saigon Joint Stock Company, said that the breakdown of the supply chain has not been overcome, which is one of the important reasons why containers from Europe and the US have returned to Vietnam. Vietnam is slower than before. Therefore, there are no empty containers to export, and this situation is expected to continue.

Businesses struggled when freight rates jumped tenfold

According to information from Mr. Xuan Chau, before the pandemic occurred, the freight rate for a 40-foot refrigerated container to Europe was about 1,600-1,800 USD and to the US about 2,000-2,200 USD. Currently, the epidemic situation in the world has been gradually controlled, goods are circulated more, but the above-mentioned container freight to Europe is still up to 16,000-18,000 USD and the US is 22,000 USD.

Ms. Tran Thi Ngoc Nga, working at RFA company, said that if in previous years, customers were only interested in the price of raw cashew nuts and the price of cashew kernels, now they have to monitor shipping rates. The characteristic of the cashew industry is that most raw materials must be imported from Africa for processing and then exported. As freight rates increase, so do costs. Buyers in the US are now very cautious in importing goods, many customers have the mentality of waiting for stable freight rates to place orders.

Many customers have the mentality of waiting for a stable price to place an order
Many customers have the mentality of waiting for a stable price to place an order

With the above freight rates, not only do exporting enterprises face difficulties, but the domestic animal feed industry is also heavily affected because this industry depends on almost all imported materials. As a result, many farmers have abandoned their ponds and farms because the more livestock they raise, the more they lose.

Businesses gradually proactively respond

Facing the current situation, Phuc Sinh Group actively agreed to let the buyer pay the shipping fee. On March 23, this business has built 30 containers of coffee of all kinds to export to many countries around the world. The company’s export volume in the first 3 months of the year increased by 20% compared to the same period in 2021. The orders were effective thanks to the increasing world price of agricultural products. The company also signs many long-distance delivery contracts for customers, including provisions on shipping prices according to market prices at the time of delivery.

Thanh Ha

High freight rates reduce the competitiveness of Vietnamese enterprises in the international market

Source: nld.com.vn
Tags: containerOcean freighttransportation

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