Increase in freight rates raises challenges for export businesses

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Shipping lines increase freight rate. Photo: T.H

The Vietnam Association of Seafood Exporters and Producers (VASEP) said that, according to information from a number of seafood businesses, from January 2024, a series of shipping lines announced an increase in shipping rates to the US, EU and countries. The cause stems from tensions in the Red Sea affecting the safety and transportation of many shipping lines, so they are forced to change their routes, prolonging longer transportation time, raising costs.

A series of large shipping lines such as Yang Ming Line, One, Evergreen Line, HMM, Maersk... have sent notices of freight rate increase for the change of itineraries on Asia - Europe routes, avoiding going through the Suez Canal and Red Sea area.

From January 2024, the freight to the US, Canada and EU will increase significantly compared to December 2023. Specifically, the West Coast of the US (LA) increased by US$800 – US$1,250, depending on the route. Specifically, in December 2023, the freight will increase from US$1,850 to US$2,873-US$2,950 for January 2024.

The East Coast of the US recorded a larger increase from US$1,400 to US$1,750 depending on the route. Specifically, in December 2023, the rate was at US$2,600, raising to US$4,100- 4,500 for January 2024.

Particularly, the freight to the EU recorded a surge compared to December 2023. Specifically, the freight to Hamburg costs US$1,200-1,300 in December, doubling to US$4,350-4,450 in January 2024.

Businesses say that the reason is 80% of goods to the East Coast of the US, Canada and the EU go through the Suez Canal. Due to tensions between Israel, Hamas, and the Houthi rebel group (Yemen) attacking ships entering the Red Sea and going through the canal. Last December, ships of Maersk, MSC and CMA were all attacked and forced to go around the Cape of Good Hope (South Africa), taking more 7-10 days. This leads to a longer ship turnaround, incurring more transportation costs.

According to VASEP, this could be a new challenge for seafood businesses in 2024. If tensions in the Red Sea area continue or escalate, it could lead to increased transportation costs and input product prices for aquaculture and seafood processing, affecting the competitiveness and profits of seafood businesses.

Regarding this issue, on December 28, 2023, the Import-Export Department - Ministry of Industry and Trade issued official dispatch No. 1116/XK-TLH on limiting the impact of the situation arising in the Red Sea area.

The Import-Export Department requests industry associations in the logistics field to strengthen monitoring and regularly update the situation so that businesses in the industry can firmly grasp the information to proactively make plans on production, import and export, avoiding congestion and other adverse impacts.

At the same time, import-export businesses closely monitor the situation, proactively make appropriate plans, and discuss with partners so that if necessary, they can extend the time for packing and receiving goods.

Along with that, it is necessary to proactively seek and diversify supply sources to limit the impact on the supply chain and search railway transportation routes to have more options.

Businesses should note that when signing and negotiating commercial contracts and transportation contracts, there should be provisions on compensation and liability exemption in emergency situations. It is necessary to purchase full insurance to prevent risks and losses when goods transportation is extended or encounters problems while traveling through this route.