The Red Sea crisis has pushed up shipping rates in recent times, however, they are now on a downward trend. Dien Dan Doanh Nghiep Magazine had an interview with Mr. Nguyen Hoai Chung, Founder and CEO of Phaata about this trend.
The Red Sea crisis has pushed up shipping rates in recent times. However, rates are on a downward trend. Dien Dan Doanh Nghiep Magazine had an interview with Mr. Nguyen Hoai Chung, Founder and CEO of Phaata, about this trend.
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Mr. Nguyen Hoai Chung, Founder, CEO of Phaata
– How has the Red Sea crisis affected export enterprises in Vietnam, sir?
When the Red Sea crisis occurs, export enterprises in Asia in general and Vietnam in particular may face 6 challenges:
First, the cost of shipping through the Red Sea or around the Cape of Good Hope in South Africa will increase.
Second, the cost of cargo insurance will also increase, increasing logistics costs for export enterprises.
Third, to ensure safety, container shipping lines have changed the direction of their ships to go around the Cape of Good Hope, instead of going through the Suez Canal as before to transport goods from Asia to Europe. This makes the journey about 6,000 km longer and takes about 10 more days.
Fourth, delays in delivery may cause importers to cancel orders or refuse to receive goods, causing damage to export enterprises.
Fifth, exporters may lose customers/export markets in Europe and the Middle East if they cannot transport their goods in a timely and efficient manner.
Sixth, many shipping lines have canceled sailings through the Red Sea, changed services, schedules, policies, etc. to cope with the crisis. This has caused disruption in the market, making it more difficult for exporters to find new shipping/logistics partners.
Sea freight rates on the Ho Chi Minh City – Northern Europe route are on a downward trend. Source: Phaata
– What will be the export prospects of Vietnam in the coming time, sir?
Despite being affected by the Red Sea crisis, Vietnam’s goods exports in the first quarter of 2024 still grew very strongly. According to data from the General Statistics Office, Vietnam’s goods export turnover in the first quarter of 2024 reached 93.06 billion USD, an increase of 17% over the same period last year.
Specifically, the growth rate is high in most major and key markets such as the US, EU, China, ASEAN; there are a variety of commodity groups with high export turnover such as: industrial processing and manufacturing goods, agricultural-forestry-fishery products, and mineral fuels.
Of which, there are 16 items with export turnover of over 1 billion USD and 4 items reaching over 5 billion USD; The domestic enterprise sector has a strong growth in export turnover, up to 26.2% compared to the same period last year, nearly double that of the FDI sector with an increase of 13.9%.
With this momentum, Vietnam’s goods exports can continue to grow sustainably in the coming time.
– Sir, why are shipping rates trending downward despite the Red Sea crisis? What is your assessment of shipping rates in the coming time?
The situation continues to be tense, by early January 2024, many shipping lines have stopped providing services to Europe via the Suez Canal in the Red Sea, or diverted ships to go around the Cape of Good Hope in South Africa. This has caused freight rates to increase dramatically in recent times, reaching a peak of 4,753 USD/40’GP in the third week of January 2024 on the route from Ho Chi Minh City to Europe, an increase of 164.31% compared to the same period in 2023, according to data from the Phaata Logistics Exchange.
However, freight rates have started to continuously adjust downward since early February 2024. So far, the freight rate from Ho Chi Minh City to Northern Europe has dropped to USD 3,065/40’GP in the middle of April (week 15), down slightly by 0.45% compared to the previous week, and down 9.78% compared to the previous month. Despite the decrease, the freight rate is still very high compared to 2023. Specifically, the container freight rate from Ho Chi Minh City to Northern Europe last week was still 110.6% higher than the same period last year.
Comparison of sea freight rates on the Ho Chi Minh City – Northern Europe route in 2023 and 2024. Source: Phaata
Freight rates have been on a downward trend in recent times due to the drop in demand after the Lunar New Year. Container shipping lines have proactively adjusted their operations to be more efficient in response to the Red Sea crisis, contributing to reducing pressure on freight rates. Currently, the international trade and shipping market is gradually accepting the new route around the Cape of Good Hope to replace the route through the Suez Canal.
I believe that this is a new normal in international transport that stakeholders (including shipping lines, exporters and importers) are forced to accept and adjust their business operations to adapt until the Red Sea crisis ends.
In my opinion, the freight rates on the Ho Chi Minh City-Northern Europe route may continue to decline further, but the rate of decline will slow down and remain at a price range of 2,500-3,000 USD/40’GP until the end of the second quarter of this year, if the Red Sea crisis persists and container ships continue to sail around the Cape of Good Hope.
Nguồn:Phaata