Economy

Export businesses face difficulties due to high shipping costs

Thu Huyen DNUM_AFZAGZCACE 15:59

Export turnover of goods has increased quite strongly, but high freight rates are making it difficult for businesses to export goods.

Exports maintain growth momentum

According to the General Statistics Office, in the first 5 months of 2024, the export turnover of goods is estimated at 156.77 billion USD, up 15.2% over the same period last year. There are 26 items with export turnover of over 1 billion USD, accounting for 90.0% of total export turnover (there are 7 items with export turnover of over 5 billion USD, accounting for 65.3%). Exports to major markets such as the United States, the EU, and China all grew by double digits. Of which, the United States is Vietnam's largest export market.

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Production at the tuna export processing factory, Nam Cam Industrial Park. Photo: Thu Huyen

In Nghe An, according to information from the Import-Export Management Department, Department of Industry and Trade, the estimated export turnover of goods in the first 5 months of 2024 is expected to reach 1,107.5 million USD, an increase of 25.04% over the same period in 2023.

Of which, many export items grew quite well such as: Electronic equipment and components increased by 72%; Steel sheets of all kinds increased by 29.2%. Some products increased due to increased export orders such as textiles and garments increased by 10.8%, wood chips increased by 70.3%. Some products with more factories in stable operation also increased highly such as footwear of all kinds increased by 34.7%, electric wires and cables increased by 86.5%... In addition, the world's rice supply narrowed due to unfavorable weather conditions, many major supplying countries were forced to ban and restrict exports, also helping rice exports increase by 96.3%...

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Graphics: Huu Quan

However, some items have a decrease in export turnover compared to the same period in 2023, typically seafood (sea fish meal) decreased by 26% due to the relatively large inventory from last year, customers have not yet had the need to import more. Processed fruits and fruit juices, decreased by 35%; Paving stones and stone blocks decreased by 10%. The main reason for the decrease in orders is due to inflation and tightening spending in some countries in the world: Europe, the United States, ... causing a decrease in demand for imported goods from these countries.

The import turnover of goods in the first 5 months of 2024 in Nghe An reached 898.5 million USD, an increase of 59.7% over the same period in 2023. The estimated import turnover of goods in the first 6 months of 2024 reached 1,018.5 million USD, an increase of 53.3% over the same period in 2023.

Sea freight rates increase dramatically

Currently, many export enterprises are facing difficulties due to high freight rates. According to enterprises, the freight rate from Vietnam to the US and European markets is about 4,000 - 4,500 USD/container and is subject to surcharges of about 1,500 - 3,000 USD/container. The total cost of shipping to the West Coast of the US for 1 container of goods in the past month has increased by 70%. Frozen goods to Europe have increased even more.

If in 2021, shipping rates increased due to the lack of empty containers and the difficulties of the Covid-19 pandemic that strongly affected the world, then in 2022, the impact of the war between Russia and Ukraine caused shipping rates to continuously increase. In early 2024, the tension in the Red Sea caused shipping rates and a series of surcharges to continue to increase. Some other shipping routes also increased.

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Container ship docks at Cua Lo port. Photo: Thu Huyen

For example, the story of exporting pine essential oil of Nghe An Pine Joint Stock Company. This company's pine essential oil products have been exported to Korea, Pakistan, Philippines, India, Laos, China, Singapore and Europe. Mr. Tran Trong Huynh - Deputy Head of Sales Department of Nghe An Pine Joint Stock Company said: Our pine essential oil processing factory has the capacity to produce 10,000 tons of pine resin and 3,000 tons of pine essential oil per year. Currently, it is the pine harvest season, the raw materials are guaranteed for processing, but the export transportation price is too high, affecting the production and business activities and profits of the company.

“Sea freight rates are currently very high, half a month ago, the freight from Hai Phong to India increased more than 2 times. There are very few places to transport goods from Vietnam to India, while turpentine is dangerous, a flammable liquid, shipping lines limit receiving goods from businesses, businesses have booked for many weeks but are still uncertain. Previously, the container imbalance fee (CIC) was borne by the importer, but now the shipper in Vietnam has to bear this cost. In addition, the serious shortage of containers has also significantly affected the export plans of businesses. According to the calculation of businesses, transportation costs currently account for over 15% of product cost, and with the current situation, they will increase even more,” Mr. Huynh shared.

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It is known that all trade transactions are currently dominated by the Chinese market. For the past 2 weeks and the market is forecast to last until the US ends its new tax law, all empty containers are being shipped to China because they pay higher costs than other countries. So in the near future, it is predicted that there will be an extreme shortage of empty containers in Vietnam. Currently, it is very difficult to book a place on a ship, fruit exporting enterprises are switching to flying, because of frequent delays and high freight rates.

In fact, from 2021 to now, there have been too many factors pushing logistics costs up, greatly affecting the competitiveness of businesses. Many orders of Vietnamese businesses have been canceled, delayed delivery, and delayed payment. Longer shipping times also increase costs, fuel consumption, costs, surcharges, etc.

An export enterprise shared that Vietnamese enterprises have almost no choice because in terms of international shipping, the Vietnamese shipping fleet is currently only responsible for transporting about 10% of the market share, mainly transporting routes such as China, Japan, Korea and Southeast Asia. Vietnam's export activities to major markets such as the US, EU... depend on foreign shipping lines.

Domestic shipping or some routes in the Southern Hemisphere have basically stable prices. However, the tense situation in the Red Sea will affect export businesses shipping goods to the US, Europe, etc. Because avoiding hot spots and taking longer routes will lead to increased costs and a shortage of containers. In the logistics supply chain, there are many stages from ports, loading and unloading, so businesses need to try to reduce costs at other stages. In addition, it is necessary to negotiate with foreign shipping lines for additional prices, to avoid cases where shipping lines take advantage to increase freight rates.

Mr. Nguyen Quoc Khanh - Director of Cua Lo Port Company Limited

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Export businesses face difficulties due to high shipping costs
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