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How does the Russia-Ukraine conflict affect Vietnam's maritime industry?

The fact that many shipping lines have closed shipping routes to and from Russia can create opportunities for Vietnamese ship owners to increase their market share in the future.
 

This is one of the comments made by the Vietnam Maritime Administration regarding the impact of the Russia-Ukraine tension on the maritime industry of Vietnam.

According to this agency, from mid-February 2022, when tensions between Russia and Ukraine occurred, fuel prices have increased worldwide, up by 50% year on year, reaching the highest in recent years.

For the shipping industry, fuel price accounts for the largest proportion in the total costs, about 35-45% of the cost structure, so the rise of fuel prices will have a great impact on business operations. 

According to a report by the Vietnam National Shipping Lines, the average prices of very low sulfur fuel oil (VLSFO) and high sulfur oil fuel (IFO380) in the first two months of 2022 grew by 43-50% year on year due to the impact of crude oil production cuts of the world's largest oil exporting countries.

Over 10 days after February 23, 2022, the average price of VLSFO in the world increased from 133 USD to 888.5 USD/ton and the price of IFO380 also rose from 74 USD to 653 USD/ton. High fuel prices will increase costs and greatly affect the business results of domestic transport enterprises, especially in the context that local firms have just recovered from the Covid-19 pandemic.

Since 100% of domestic sea routes are currently covered by Vietnamese enterprises, domestic freight rates have remained low and stable so far, not being adjusted by natural gas prices yet.

Meanwhile, international freight rates have started to rise since late 2020. At the end of March 2022, fuel prices rocketed but most shipping lines had not risen freight rates according to fuel prices, except for a few shipping lines that increased fuel surcharges from March 2022.

As for the freight rates for other types of goods, according to the contract signed between the ship owner and the customer, the Vietnam Maritime Administration has not received any feedback from enterprises on the rise of freight rates. However, in the coming time, if fuel prices continue to grow or there is no downward trend, sea freight rates may be affected by fuel prices.

Regarding the direct impact of the conflict on the Vietnam-Ukraine shipping route, the Vietnam Maritime Administration said that since the war broke out, all seaports in Ukraine have closed, and shipping lines have stopped receiving goods to and from Ukraine.

For the Vietnam - Russia route, a number of major shipping lines in the world, especially European shipping lines, have closed transport routes and stopped receiving goods to and from Russia.

However, some Asian shipping lines still maintain this transport route but they ask customers to bear all risks in case of force majeure. In addition to the difficulty in freight transport, international payments for goods imported and exported to Russia are also affected, so many Vietnamese shippers have changed their business plans, and reduced the volume of goods exported and imported from Russia.

According to the Vietnam Maritime Administration, many major shipping lines have closed transport routes to and from Russia, but demand for import and export of goods between Vietnam and Russia is maintained. This can create opportunities for Vietnamese ship owners to increase their market share in the future.

Dau Tu

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