Repeated freight cost hikes by shipping companies in the first months of 2012 are exerting strong pressure on Vietnamese exporters. This also indirectly weakens the competitiveness of Vietnamese goods in the region.
Frequent big rate hikes
According to the Vietnam Association of Seafood Exporters and Producers (VASEP), freight rates increased from US$640 per 20-foot container to US$1,200 in the first three months of 2012 (higher than in Thailand and the Philippines by 10 - 15 percent), thus distressing exporters, as this will indirectly reduce the competitiveness of exported Vietnamese seafood products against competitors, especially in European and American markets.
In addition, as of April 1, 2012, a general rate increase (GRI) of US$400 per 20-TEU container was imposed for cargo shipped from Vietnam to Europe. A similar GRI will be applied to freight carried from Vietnam to the United States from May 1.
Giving reasons for the hike, carriers attribute to higher oil prices and operating costs. Given higher inputs, unchanged freight rates would lead to huge losses and bankruptcy.
According to major shipping companies, there is no need to worry about freight rates because they go up now and down later, and vice versa. They pledge to cut the rates as soon as they can. For example, in early March, freight rates from Vietnam to Europe increased to US$1,400 - 1,500 per TEU, but then fell to US$1,200 - 1,300 the middle of April. At present, carriers have announced an increase in the GRI from early April, possibly to US$1,500 per TEU.
According to the Vietnam Freight Forwarders Association (Viffas), current hardships force shipping companies to raise freight rates to maintain operations. The hardship has also forced them to reduce ship fleets and reduce shipping routes. This sent exporters into an even worse dilemma because of insufficient shipping routes available to target markets.
Experts meanwhile warned that exporters need to have early forecasts and plans to cope with unexpected situations.
Nervous exporters
In response to shipping charge hikes, exporters said it is necessary for carriers to discuss rate schemes with them before applying them, as hardships face both sides. Hence, carriers should not unilaterally raise charges.
Higher shipping costs means diminishing the competitiveness of Vietnamese goods. This will hurt domestic exporters who are highly likely to suffer losses when filling contracts signed earlier.
A representative of Hung Vuong Seafood Corporation said the company now exports nearly 15 containers of frozen fish to Europe and the United States a day. Since March 1, the company has paid an additional US$800 - 1,000 a container, depending on the route.
Mr Truong Dinh Hoe, General Secretary of VASEP, said: “The Vietnamese seafood competitiveness in Europe and the US is largely affected by this development. Meanwhile, shipping charges in Vietnam are often higher than those in regional countries like Thailand and Philippines by 10-15 percent per container.”
According to VASEP, the EU and the US are the two largest importers of Vietnamese seafood. In 2011, they accounted for nearly 42 percent of Vietnam’s total seafood export value. Therefore, the increase in freight rates from Vietnam to these two markets will significantly impact the business plans of exporters.”
Not only seafood exporters, but rice, cashew nut, coffee and pepper exporters among others are also impacted by the move, as shipping costs are borne by sellers.
For that reason, to limit monopolistic rate hikes imposed on local exporters by foreign shipping companies, Vietnamese authorities necessarily adopt support measures to make shipping cost rises more reasonable.
Hoang Linh
Vietnamese
