Increased logistics costs hurt Vietnamese exporters
Logistics costs will continue to skyrocket as demand soars while supply will remain limited at least until the end of this year, said industry experts and businesses.
Containers at Hai Phong Port in northern Viet Nam.
Demand is to climb due to increased stockpiling while new ships won't be entering service until 2023-24, according to a recent report by SSI Securities Corporation (SSI), a leading securities firm in Viet Nam. New variants of the novel coronavirus are likely to further complicate things for global supply chains.
The last few years have seen logistics cost triple, even quadruple compared to pre-pandemic levels. Vietnamese exporters have been told there is no end in sight to the situation.
A representative from Nam Viet Seafood JSC said according to plan, the company was to lease 400 containers last month but so far it has not been able to secure the amount due to an acute shortage of containers available.
The company recorded VND52.8 billion in logistics costs alone during the first nine months of 2021, almost three times the amount of the same period in 2020.
Vinh Hoan Seafood JSC said logistics costs for the same period totalled VND210 billion, nearly three times the cost it recorded in 2020, accounting for as much as 84 per cent of its cost of sales.
Both firms said the increased logistics cost was the underlying reason behind their significantly reduced profit last year.
Increases in transport time, delayed orders and other related expenses all contribute to greater pressure on exporters to meet buyers' demand, said Nguyen Hoai Nam deputy secretary-general of the Vietnam Association of Seafood Exporters and Producers (VASEP).
The situation is likely to result in Vietnamese exporters losing out on potential contracts or even existing clients as they are unable to deliver their products.
Nguyen Tuong, deputy secretary-general of the Vietnam Logistics Business Association said Vietnamese ports are suffering from not just a lack of containers but also skilled workers. As things stand, it's doubtful Vietnamese seafood exporters will hit a US$9 billion sales target set by the Ministry of Industry and Trade for this year.
To make matters worse, the bulk of Vietnamese exports are dependent on foreign logistics firms as the country's shipping fleet currently accounts for just 10 per cent of Viet Nam's export volume, mainly on the shorter routes to Southeast Asia and South Asia.
A report by VASEP last year said shipping costs from Viet Nam to Southampton in the UK had increased from US$1,600 per container at the beginning of 2020 to $5,000 by the end of 2020. By May 2021, 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 2021, it could cost firms as much as $8,000, said VASEP.
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.