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Higher shipping costs are here to stay despite exporter agony

Container shipping costs in Viet Nam have increased fourfold, even eightfold on certain high-demand routes compared to pre-pandemic levels, the latest logistics report by SSI Research has said.

 

 

A container ship at Cai Mep-Thi Vai Seaport in southern Ba Ria-Vung Tau Province. 

 

 

A report by the Vietnam Association of Seafood Exporters and Producers (VASEP) said shipping costs from Viet Nam to Southampton in the UK have increased from US$1,600 per container at the beginning of 2020 to $5,000 by the end of 2020. By May this year, the price had increased to $9,100 per container.

The cost to transport a container to Los Angeles in the US was $1,800 a container at the beginning of 2020. By the end of 2020, it was $4,000. In May, it could cost firms as much as $8,000, said VASEP.

Notably, the cost to ship Vietnamese dried agricultural products to Israel has skyrocketed from $2,300 in October last year to $6,300 in March this year. The latest quote for this particular route, according to firms, has reached as high as $11,000 per 20ft container.

According to the Vietnam Maritime Administration (VMA), the maritime transport industry has recorded at least three separate price hikes since the end of 2020. The cost has risen across the board for most routes and commodities from $1,000-$5,000 to $7,000-$8,000. The cost for special shipments can reach as high as $10,000 for a container.

According to the administration, the pandemic has forced shipping companies to cut back on their operations, which has caused a shortage of empty containers and the closures of a number of seaports around the world contributing to rising shipping costs.

Meanwhile, exporters are the ones who are bearing the brunt of the price hike. This is extremely difficult as they have been struggling since the start of the pandemic to stay afloat and keep their workers from being laid off.

Nguyen Xuan Chau, chairman of the board of Viet Long Sai Gon JSC, a seafood and dried food exporter in HM City, said rising shipping costs have forced his firm to cut back on production. The firm has attempted to renegotiate with clients but so far it has proven to be difficult as contracts are typically signed for the whole year.

Phan Minh Thong, general director of Phuc Sinh JSC, a condiment and coffee exporter in HCM City, said shipping costs to the EU have risen up to $15,000 per container. His firm is expected to spend as much as five million dollars more on shipping over what they had originally budgeted.

"Before the pandemic, we could choose from 30 international shipping companies. The pandemic has forced 18 out of these out of business. The remaining 12 have been pushing prices up ever since. We [exporters] don't really have choices anymore. We even have to fight each other for a place on their ships," he said.

SSI Research forecast shipping costs will likely top out in the last quarter of 2021. Minor adjustments [price decreases] will likely follow during the first half of 2022. However, meaningful price adjustments can only be expected to be seen as early as 2023 when shipping companies bring out more ships. In all of these scenarios shipping costs will likely be higher compared to the pre-pandemic levels.

Hoang Hong Giang, deputy head of the VMA, said the administration has requested shipping firms to publicise their quotes. However, the administration will not and cannot interfere with their pricing policies, especially those who operate international shipping lines to the EU and the US.

To address the current shortage of empty containers, the administration has given the green light for shipping firms to bring in empty containers should domestic supply fail to meet demand.

In addition, the administration has formed a task force to investigate and monitor extra fees and costs shipping firms may bill to their customers. Those who are found to violate the transparency rules or overcharge their clients will face stiff penalties in accordance with Government Decision 142/2017/NÐ-CP on maritime transport.

Despite the pandemic, Viet Nam's export/import sectors have managed to maintain momentum in the first half of the year. The country's total export/import turnover for the first six months of 2021 reached $320 billion, a 32 per cent increase compared to the same period last year.

During the first half of 2021, the total volume of goods that passed through Viet Nam's seaports reached 364.4 million tonnes, a 7 per cent increase from the same period last year. Of which, exports accounted for 91.4 million tonnes and imports for 114.3 million tonnes, a 9 per cent and 3 per cent increase from the same period last year respectively. Domestic goods accounted for 157.7 million tonnes, an 8 per cent increase from the same period last year. 

Source: VNS

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