Container freight rates increase shockingly, businesses cry and complain that they can't bear it

Sky-high container prices are said to be eroding business profits (Illustration photo)

Business is facing difficulties on all sides.

"The high cost of transportation, the container freight rate from last year to this year has increased 4 times, making it extremely difficult for businesses. The more we work, the more we lose, but once we have signed a contract, we have to do it," Mr. Tang Xuan Truong, Director of Hung Viet Agricultural Products Joint Stock Company (Hai Duong) shared about the current difficulties of businesses.

Mr. Truong said that, in fact, businesses purchasing and exporting agricultural products are currently facing "difficulties in many ways" because domestic and international transportation costs have increased significantly. High costs erode business profits while the industry's profit margins are already thin.

"Previously, a container to Taiwan cost about 500 - 600 USD, now it costs nearly 2,000 USD," said Mr. Truong. Not to mention, the time is also much longer, if it used to take about 7 days to go to Malaysia, now it takes 15 days because of waiting for connecting flights.

At this time, according to Mr. Truong, not only is purchasing difficult because most people have the mentality of "if I grow it, will I be able to sell it?", but there are also difficulties in circulation, causing businesses to only "complain to the heavens".

As a large enterprise in the seafood export industry, Mr. Tran Van Linh - Chairman of Thuan Phuoc Seafood and Trading Company (Da Nang) also finds it difficult to deal with the situation of continuously skyrocketing sea freight rates and a shortage of empty containers.

According to Mr. Linh, previously, each container of goods of the enterprise had a shipping price of only 70-100 million VND, but now this number has increased to 260-330 million VND. Not to mention, shipping lines often announce a shortage of empty containers, forcing goods to postpone their departure date, affecting quality.

According to this person, the sky-high container prices have eroded the company's profits. Mr. Linh gave an example: Previously, his company exported a container worth 100,000 USD, of which only 1,500 to 2,500 USD was spent on transportation costs, but now the transportation costs are up to 8,000 USD, a 4-fold increase.

"Previously, transportation costs only accounted for 2.5% of each enterprise's export price, but now they have increased to 8%. Meanwhile, enterprises cannot increase the price of goods because these are all pre-signed contracts," Mr. Linh confided.

Some other businesses said that even with new orders, increasing prices is extremely difficult, because this greatly affects competitiveness and consumption.

"Combo" of high fares plus extended time

Difficulties are not only for export enterprises, Mr. Nguyen Duc Cuong, Director of Sunpla Joint Stock Company - a mold and plastic component manufacturing enterprise in Bac Giang also said that the current multi-fold increase in transportation costs is really too much for enterprises importing raw materials for production.

Freight costs typically account for about 10% of the cost structure. "Many businesses have signed contracts and are still having to produce and deliver goods at a loss, which is really a headache," said Mr. Cuong. In addition, according to Mr. Cuong, congestion at ports also causes time and costs to pile up significantly.

Mr. Tran Thanh Hai - Deputy Director of the Import-Export Department (Ministry of Industry and Trade) - affirmed that the increase in shipping freight rates and empty container rental prices has strongly affected import-export activities, especially export. The relationship between ship owners and cargo owners is a mutually dependent relationship. Shipping lines need to be transparent about freight rates and share costs with cargo owners to avoid excessive price increases.

It is worth noting that although the situation of increasing container freight rates has lasted since last year until now, businesses have repeatedly called for help, and management agencies have intervened, there is no sign of "cooling down" but rather it is getting more and more "dancing".

In a heated meeting on the increase in container shipping rates by sea earlier this year, Huynh Thi My - General Secretary of the Vietnam Plastics Association (VPA) said that the recent increase in shipping rates by 3-4 times has seriously affected plastics businesses, reducing export sales.

According to her, an Indian company in the Vietnam-Singapore Industrial Park specializing in producing yarn for export announced that it would close its factory in December 2020. The reason given by the company was that shipping rates were too high, affecting export activities and production costs in Vietnam were no longer as cheap as before. Therefore, they have temporarily suspended all orders since December 2020.

Meanwhile, many other plastic businesses are selling at almost no profit but the amount of goods exported is still very slow, the amount of inventory compared to this time last year is up to 50%.

Regarding the increase in container freight rates, representatives of shipping lines explained that the impact of the epidemic has prolonged the release of goods and the rotation of empty containers.

The Vietnam Maritime Administration has also issued a document requesting shipping lines to be transparent about price information as well as make appropriate adjustments to ensure the harmony of interests between parties, but up to now, the situation of increasing container prices has still occurred, causing many export industries to fall into a difficult position.

Many forecast that this situation will continue and last until 2022, which will negatively affect the production and transportation activities of both import and export businesses.

In order to ease difficulties for businesses affected by the Covid-19 pandemic, the Ministry of Industry and Trade said it is proposing to reduce container storage, warehouse and yard storage fees for goods at seaports and logistics centers for businesses.

Specifically, Deputy Minister of Industry and Trade Tran Quoc Khanh issued Official Dispatch No. 4812/BCT-XNK dated August 10 to the Vietnam Logistics Services Association, Vietnam Seaport Association, seaport management and exploitation units, shipping enterprises (shipping lines), logistics centers to consider reducing container storage, warehouse storage, and yard storage fees.

According to Mr. Khanh, 19 southern provinces and cities are currently applying Directive 16 of the Prime Minister. Of which, Ho Chi Minh City, Binh Duong, Dong Nai, and Long An are localities with large import and export output. The application of social distancing and disease prevention measures has forced some businesses to temporarily cut production scale, leading to congestion of imported containers, increased storage time, and increased costs for businesses.

In this situation, the leaders of the Ministry of Industry and Trade requested the above units to consider reducing the fees for storing containers, warehouses, and yards for goods at seaports and logistics centers for businesses forced to cut production due to the impact of the Covid-19 pandemic. At the same time, the units should improve the capacity to release goods from the port, the exploitation capacity of the port yard, and coordinate between the parties to regulate the amount of goods imported to the port to facilitate import and export businesses.

According to Dan Tri