For more than a year now, Mr. Nguyen Xuan Chau, Chairman of the Board of Directors of Viet Long Saigon Joint Stock Company, has to work very hard to manage the business (DN) to sustain and maintain production to ensure the minimum wage for employees. all officials and employees in the context of the continuous outbreak of the Covid-19 epidemic along with the galloping rate of sea freight rates.
“Last year we had no profit and this year’s forecast is similar,” said Mr. Chau.
Mr. Chau said that at the moment, the average freight rate for a 40-foot refrigerated container from Cat Lai port (HCMC) to Belgium is $9,500, up sharply from $1,600/container in the same period last year. And yet, announcements from shipping lines and forwarders recently show that it is likely that the freight rate on this leg will increase to 10,500 USD/container next July.
In addition, the shortage of containers is also alarming, the risk of not having a ship to transport goods is very high. “In the past, almost every week, there were ships going to Europe (EU) with an average price of only $1,200-1,500/container, now only two ships depart each month because of the isolation and distance in some areas. The shipping time was extended from 28 days to 35-40 days because it had to be transshipped through Singapore, causing difficulties in the financial flow of enterprises,” added Mr. Chau.
The situation of freight rates rising too high along with the export stagnation due to the lack of ships caused Viet Long Saigon Joint Stock Company to actively adjust in the direction of relaxation, reducing the production rate accordingly to limit large inventories. . Enterprises also have to manage themselves by renegotiating the selling price with partners, but this is very difficult because most contracts are signed for a full year, not easy to adjust.
“We cannot anticipate a situation where the freight for refrigerated containers can reach 10,000 USD. With the current trend of increasing sea freight rates along with high production costs to ensure epidemic prevention requirements, it is difficult for enterprises to meet the requirements of epidemic prevention and control. I have a chance to prosper in the last 2 quarters of the year.My business is fortunate to be able to endure it because there is no loan and has fully depreciated its fixed assets, while those businesses that have not fully depreciated and still owe the bank do not know what will happen next. How?” – Mr. Nguyen Xuan Chau expressed.
Shipping charges increased many times, causing difficulties for exporters. Photo: NGOC ANH
Fighting for seats on the train
Mr. Phan Minh Thong, General Director of Phuc Sinh Joint Stock Company, calculated that with the current freight rate of 15,000 USD/container transported to the EU, enterprises exporting about 500 containers per month would be overspending by 5 million USD compared to expected due to the unexpected increase in shipping costs. Meanwhile, enterprises signed a contract to deliver goods to customers by CIF method (delivery at the port of destination) until the end of this year, so they cannot increase the price.
“Before the epidemic, there were 30 main shipping lines serving international shipping. The pandemic caused 18 firms to go bankrupt, the remaining 12 carriers pushed prices continuously, exporters did not have the right to choose, negotiate, have to compete to get a seat on the train “- Mr. Thong said.
The sea shipping route to the Philippines has a “soft” shipping price, but it is not out of the price spiral. Mr. Nguyen Van Thanh, Director of Phuoc Thanh IV Production – Trading Co., Ltd., said that the freight rate at the beginning of 2021 had only decreased slightly, but the price quotation in July has increased again. Compared to the time before the appearance of the Covid-19 epidemic, the freight rate for rice exports on this route has now nearly doubled, from more than 500 USD to nearly 1,000 USD/container.
“Compared to other shipping routes, this route increases freight at least thanks to the alternative solution of transporting by bulk vessel with a cost that is 50% cheaper than shipping by container. This is an effective solution for the market. However, in order to export rice by bulk ship, enterprises must have large orders of about 2,000-10,000 tons, “- Mr. Thanh informed.
At the recent annual general meeting of shareholders, Mr. Le Van Quang, Chairman of the Board of Directors of Minh Phu Seafood Joint Stock Company, also mentioned the story that the container freight to ports increased by 2-4 times, making the “big man”. Shrimp industry is likely to achieve only 80% profit compared to the plan. “Currently, on some international ships, sailors infected with Covid-19 have to be isolated, making the shortage of ships even more serious,” Quang added.
Difficult to lower container freight rates before 2023
Logistics experts see the rate of train keeping on schedule to remain low throughout 2021. Although there are some signs that average delays improved in April. but this level of performance is still the lowest in the past 10 years.
Notably, the sudden closure of China’s Yantian container port – part of the world’s fourth-largest container port in Shenzhen – in early June also added to the crisis of container shortages, even though the disruptions have been be remedied. In the face of traffic congestion and higher demand, container prices are not expected to drop until the end of 2022. Even after cooling down, the new price level will be higher than before. during a pandemic.