Higher Shipping Fees Hurt Smaller Firms

Thursday, 03 June 2021

Vietnamese exporters are struggling to send goods abroad despite high demand because of a nearly five-fold year-on-year surge in container shipping costs.
Shipping costs from Asia to Europe rose above $10,000 per container for the first time on record last week, a 485 percent increase year-on-year, according to the Drewry World Container Index.

Ho Van Hiet, CEO of Prime Logistics Vietnam, said that while foreign direct investment giants with established contracts are mostly unaffected by the price increase, small and medium Vietnamese exporters were fighting to secure container slots for their shipments.

"Exporters who used to send 10 containers per shipment are having to cut it to a few as most ships are filled up," he told VnExpress International.

Nguyen Dinh Tung, CEO of fruit exporter Vina T&T, said that that rising transportation costs has become a global issue and it has pushing smaller companies out of the market.

A shortage of containers also means longer transportation time and this affects the export of some products like fruits.

Mangoes from Vietnam, for instance, can be preserved for 35 days. Before, it took 25 days to deliver the product to Western buyers, but now it takes 30-35 days, Tung told local media, adding that many buyers have stopped importing because there is not enough time to sell the products.

Industry insiders say that container transportation charges have risen as demand rises in the Europe and the U.S., with their economies beginning to recover from Covid-19 impacts. Companies are beginning to restock and make more purchases.

Nguyen Thi Anh, spokeswoman for a HCMC-based logistics company, said that as container costs rise so do related fees like storing and moving them out of ports.

Since last year, many exporters have been struggling to negotiate logistics costs with buyers; some have either left the market or accepted losses in order to retain customers, she told local media.

Some small exporters of garment products, furniture and seafood have stopped exporting altogether after not being able to negotiate a contract with buyers, she added.

Hiet said he sees another increase in shipping rates in June, sending prices of shipping a 40-foot container from Vietnam to Europe to around $11,000, up 10 percent from now.

The rates could go even higher as demand typically peaks in August and September, he added.

The only solution for Vietnamese exporters is to book their delivery soon so to ensure they have secure container slots on ship, he said.