Difficulties for businesses when Ocean Freight increase

Since the end of May, Ocean Freight have risen two or three times more than it used to be in the first quarter of 2024. Currently, shipping fee from Ho Chi Minh City to the US for 40-foot long container has risen to $7000, while at the beginning of the year, the fee was just over $3000. Ocean freight have a strong impact on business export.

Over the past six months, a series of major plywood import marketplace such as the US, Japan, the European Union(EU) and South Korea have grown considerably. However, with the constant rise in shipping fee, this has had a huge impact on the decisions of foreign importers. From the chart below, we can see that the total amount of plywood export orders from January 2022 to June 2024. The amount of order from June 2024 decreased compared to the previous month, which is opposite with last year and the year before that.

This has caused huge damage for domestic companies because wooden products in general and plywood products in particular cost a large amount of fee to ship due to their size. Not only are the charge high, but they also struggle with the lack of containers to transport. In fact, they have to wait for a very long time for their products to be shipped, which has led to a significant increase in surcharge at sea port.

The price to ship from Vietnam to Southeast Asia, Europe, East or West Coast has increased to the same level as during the pandemic. This is because of the geopolitical conflict, the instability at Red Sea, which lead to the reschedule from shipping companies. Instead of going directly to the Suez Canal, they are going through Cape of Good Hope, which increase 8000 nautical miles more for the routes and takes two to three weeks.

Besides, many manufacturers and importers around the world have increased their demand for exports and imports as a result of the Us and EU tariff since August, resulting in increased shipping demand. This makes the production plan of the import and export business become passive and leads to additional charge from shipping companies. There is a case where a company’s goods that has been shipping two weeks before receiving an offer to raise the surcharge, which it affects their revenue.

Moreover, the increase in shipping time also leads to a lack of empty containers for packing, congestion in ports that significantly affects delivery time, receive time of goods for many enterprises.

In order to address the difficulties, the Vietnam Maritime Administration is directing Maritime ports and departments to monitor costs, congestion and container supply. The ministry of Maritime Affairs is assisting with administrative efficiency measures to save costs, speed up port releases, reduce procedures and creative favorable conditions for ships and cargo vessels.

It is expected that in the last four months, with the support from the Government and coordination between logistics, transportation and manufacturing enterprise in re – adjusting the shipping plan,shipping price are gradually decrease.

Current shipping prices from Vietnamese port to major marketplace such as the US, India and EU have fallen slightly as a positive signal. However, many exporters suggest that the downward trend will be difficult to sustain until the end of the year as supply from fleets around the world is still unable to catch up with growing demand, especially at the end.