Suez Canal incident: Vietnam’s perspective

On March 23, 2021, on the way from Tanjung Pelepas Port (Malaysia) to Rotterdam Port (the Netherlands), the Ever Given, a container ship, ran aground when moving along the Suez Canal.

Suez Canal incident: Vietnam’s perspective

Although it was freed on March 29, 2021, the consequences are dire. The blockage of the canal has been cleared now. What are its implications for Vietnam?

The Suez Canal was blocked for days, so many ships were stuck, causing delays in delivery and disrupting the global supply chain, which was already in trouble.

Impacts on Vietnam

With a capacity of over 20,000TEU and a length of 400m, the Ever Given is one of the world’s biggest container ships and was fully loaded when it was lodged. The impacts of the incident extended far beyond the goods it contained.

Although the route passing through the Suez Canal is the shortest to link Asia and Europe, the incident has affected not only trade between Asia and Europe but also that between Asia and Northern America. The Cosco Shipping

Peony, a 13,500-TEU container ship that transports cargo from North America to Vietnam, planned to enter Cai Mep - Thi Vai Port (CM - TV) on April 6 but was stuck in the Suez Canal and had to shift the expected arrival date to April 12. As of March 29, almost 180 other ships shared the same fate with the Cosco Shipping Peony and had to wait to enter the Indian Ocean. Some of them are also bound for Vietnam.

Exports from Vietnam to both Europe and North America have been hampered, too. The Arnold Maersk, an 8,000-TEU container ship, had to head towards the Cape of Good Hope to avoid the Suez Canal. The route was more than 6,000km longer and cost US$400,000 more and the delivery period was extended by at least a week.

The time taken for containers to wait for the obstruction to be cleared and then to pass through the canal not only breeds delays but also triggers unintended consequences. After the Suez Canal has been cleared, major ports in Europe and Asia may be under strains since many ships enter them within a short period. Feeder ships must also wait for mother ships at transshipment ports, so smaller ports in Asia will be in trouble, too. In April 2021, ports in Vietnam may face this problem.

Besides, container ships from Europe and North America to Asia not only carry cargo but also have empty containers, so that they can be loaded with export products. The severe shortage of empty containers in Asian countries, including Vietnam, will be worsened by the incident.

An undesirable consequence is that shipping charges may soar and other fees will rise, too.

Many maritime experts say that as of April 5, shipping charges for main routes such as Asia - Europe and Asia - North America were yet to rise, but those for routes linking Asia to South Africa, Western Africa and South America climbed up. Given Vietnam’s export profile, this will not leave significant impacts yet.

Other implications

 

There are other implications that Vietnam’s authorities and enterprises should pay attention to.

First, the incident pertains to giant container ships. The Ever Given is among the world’s biggest, and while controversy still simmers over their benefits and drawbacks, over 600 container ships of more than 10,000TEU are in operation and almost 200 are being built. When these ships meet with accidents along routes of strategic international importance, the impacts will be severe, with the incident in the Suez Canal as a case in point.

Since Vietnam operated deepwater container ports at CM - TV (2009) and Lach Huyen (2018), these giant container ships have entered the country at a greater frequency and incidents, while less serious than that in the Suez Canal, have arisen.

In May 2011, the container ship Grete Maersk ran aground at CM - TV and took three days to rescue. In June 2018, the container ship ZIM New York was also stuck at CM - TV and took one day to free. In June 2019, the Nagoya Express got into an accident after leaving Lach Huyen port.

Collision with the cranes (US$5 million) caused the latter to be out of order and the export of Vietnamese goods to be delayed. While there were no serious chain effects, a question remains—what will happen if container ships of 14,000-18,000TEU, far greater than the 5,000-9,000TEU capacity of the above container ships, run aground?

There has been feedback from port and shipping firms that CM - TV and Lach Huyen routes do not meet design standards, but solutions (which involve dredging) have not been efficiently implemented.

Consequently, ships docking at CM - TV and Lach Huyen are not only loaded below their capacity but also confronted with risks. This issue was brought up when former Prime Minister Nguyen Xuan Phuc, now State President, visited Ba Ria - Vung Tau on March 20. It is hoped that the Suez Canal fiasco will compel related agencies to promptly address this problem to minimize risks in Vietnam’s shipping industry.

The supply chains of Vietnamese firms will be hampered to some extent by the Suez Canal incident. Materials may arrive late and some export orders may not be fulfilled as scheduled. While such an incident is unexpected, similar ones may occur, spelling trouble for supply chains.

Fragile supply chains have plagued many firms since Covid-19 spread. Many enterprises have pondered how to adjust their production models. Just-in-time models, which rely on accurate forecasting and reliable transport services, are gradually replaced by just-in-case models, under which firms must maintain inventories in case delivery incidents arise. Soren Skou, CEO of A.P. Moller-Maersk, one of the leading and most renowned container lines, has also suggested enterprises embrace this shift.

SGT

Goods owners say shipping freight costs are far too high

Goods owners say shipping freight costs are far too high

The high container shipping cost has caused difficulties for import/export companies. They believe that shipping firms joined hands to push service fees up.

 
 

Other News

.
FDI supports Vietnam climb the global value chain
FDI supports Vietnam climb the global value chain
BUSINESSicon  09/06/2021 

Vietnam has successfully transformed into a manufacturing-oriented economy,
supported by stronger global value chain (GVC) participation thanks to a rise in foreign direct investment (FDI), especially in the manufacturing industry.

Business stories May 31–June 6
Business stories May 31–June 6
FEATUREicon  09/06/2021 

People who are worth VND500 trillion are listed among the top 30 richest persons in the US and the top 17 in China, according to Forbes. In Vietnam, such a person would be at the top.

Billions of US dollars flow into Vietnam’s stock market despite Covid-19
Billions of US dollars flow into Vietnam’s stock market despite Covid-19
FEATUREicon  09/06/2021 

The stock market has been witnessing unprecedented cash inflow so far this year, even though the Covid-19 pandemic has become more complicated in Southeast Asia.

Expanding action to weed out pandemic
Expanding action to weed out pandemic
BUSINESSicon  08/06/2021 

The prime minister has ordered a series of sturdy actions to fight against COVID-19 and spur on local production, as people look to the government for protection with the spectre of the pandemic looming yet again.

Vietnam a bright spot for foreign investors: experts
Vietnam a bright spot for foreign investors: experts
BUSINESSicon  08/06/2021 

Vietnam has been chosen among leading destinations in Southeast Asia by Japanese investors, Nakajima Takeo, Chief Representative of the Japan External Trade Organisation (JETRO) in Hanoi, has said.

FDI inflows remains spotlight of Vietnam's economy
FDI inflows remains spotlight of Vietnam's economy
BUSINESSicon  09/06/2021 

The government has set up an FDI task force to support multinationals and foreign businesses grasping investment opportunities in Vietnam.

Businesses need more effective support amid COVID-19
Businesses need more effective support amid COVID-19
BUSINESSicon  08/06/2021 

Like many countries, Vietnam may have to depend on vaccines to achieve herd immunity and be virus-free, but enterprises may not be able to wait. They are in dire need of help and are craving new momentum to return to a “real normal” situation.

Vietnam expects to see export growth in rising global demand
Vietnam expects to see export growth in rising global demand
BUSINESSicon  08/06/2021 

Global demand for goods is recovering and this is an opportunity for Vietnam to boost its exports of consumer and industrial products, according to the Ministry of Industry and Trade (MoIT).

Stock market an attractive investment channel for local players
Stock market an attractive investment channel for local players
BUSINESSicon  08/06/2021 

The stock market is still an attractive investment channel for investors in the near future. However, it also poses many challenges for regulators and market members, said experts.

Vietnam calls for initiatives to ensure efficient functioning of APEC supply chains
Vietnam calls for initiatives to ensure efficient functioning of APEC supply chains
VIETNAM & WORLDicon  07/06/2021 

Asia-Pacific Economic Cooperation (APEC) economies needs to continue promoting free and open trade and investment, undertake initiatives to ensure regional supply chains to function smoothly and efficiently,

Vietnam faces shortage of cold storage warehouses
Vietnam faces shortage of cold storage warehouses
FEATUREicon  09/06/2021 

The growing tendency of consumers shopping online globally has led to a sharp demand for cold storage warehouses, but investment in cold storage facilities remains modest.

Small tourism businesses struggle to adapt to COVID-19
Small tourism businesses struggle to adapt to COVID-19
BUSINESSicon  07/06/2021 

The fourth wave of COVID-19 infections in Vietnam has caused disruptions to most sectors once again as the country was preparing for the tourism season.

Drawing up plans to buttress recovery
Drawing up plans to buttress recovery
BUSINESSicon  07/06/2021 

The ongoing fight against the COVID-19 pandemic has led to huge demands for capital for Vietnam to support local production. 

Solar PV market under duress from dependence on imports
Solar PV market under duress from dependence on imports
BUSINESSicon  07/06/2021 

As one of the fastest-developing countries in solar thanks to the current feed-in tariff, Vietnam’s billion-dollar solar panel market is mostly dominated by foreign investors and depending on imports.

VN game industry can become big exporter: experts
VN game industry can become big exporter: experts
BUSINESSicon  07/06/2021 

Vietnam’s mobile game market has huge potential and games can become one of the country’s major exports, experts have said.

VIETNAM BUSINESS NEWS JUNE 8
VIETNAM BUSINESS NEWS JUNE 8
BUSINESSicon  08/06/2021 

Vingroup to produce Covid-19 vaccine

Trade with China: $20 billion in exports, $43 billion in imports
Trade with China: $20 billion in exports, $43 billion in imports
BUSINESSicon  08/06/2021 

Vietnam’s import and export activities in May were affected by the fourth Covid-19 wave, but they still increased generally.

Record hot weather in North, power shortages could occur
Record hot weather in North, power shortages could occur
BUSINESSicon  08/06/2021 

In the most recent heat wave in northern Vietnam, electricity consumption has set "historic peaks".

Ministry denies proposing price stabilisation fund for steel
Ministry denies proposing price stabilisation fund for steel
BUSINESSicon  07/06/2021 

The Ministry of Industry and Trade (MoIT) has denied rumours that it proposed the establishment of a State stabilisation fund to cope with the sudden increase in steel prices that has impacted many businesses.

Amid crisis, airlines seek ways to prosper
Amid crisis, airlines seek ways to prosper
BUSINESSicon  07/06/2021 

Suffering heavy losses due to the drop in passenger numbers under the impact of the Covid-19 pandemic, some airlines have boosted cargo transport services and made a profit. 

 
 
 
Leave your comment on an article

OR QUICK LOGIN