Soaring shipping costs dampen exports

Figures from independent maritime research consultancy Drewry show that in mid-July, instant-delivery transportation cost for 40-foot containers from Shanghai to New York touched $9,387, almost double compared to February.

Dao My Linh, business director at southern-based Dony Garment Co., Ltd., revealed that with 30-40 per cent growth in the order intake, the company feels secure until the traditional Lunar New Year next January. However, transportation costs remain a thorny issue.

Most recently, Dony completed an export order to the Middle East, and their export partner had to spend six times the usual transportation cost of $1,500 for a 40-foot container.

"The Middle East is one of our key export markets, accounting for half of the company’s revenue. In the rest of this year, transportation costs largely depend on the global geopolitical situation. As there are many uncertainties in the world, it is unlikely that costs will go down anytime soon," said Linh.

Dony Garment has since shifted to more stable markets in Southeast Asia, and several African nations.

"These markets offer stiff competition, but also more favourable logistics costs. In some markets, costs have yet to be affected by the geopolitical situation," Linh explained.

Nguyen Van Thu, chairman of G.C. Food JSC based in the southern province of Dong Nai, said that as of August, the company’s exports have slowed.

"The retreat in order intake could be for a number of reasons, chief among them the spike in shipping costs," said Thu, adding, "Transportations cost from Vietnam to other markets in Southeast Asia and South Korea soared 200 per cent; to Japan and India up they were up 150 per cent."

A container of agricultural products often has a modest value from $10,000-15,000, whereas the transportation cost now ranges from $2,000-$3,000 per container.

Lam Thuy Ai, chairwoman of the Board of Members at Ho Chi Minh City-based production and trading firm Mebipha Co., Ltd., said, "As costs have tripled or quadrupled since the start of the year, we have crafted short-term plans, instead of long-term plans, to minimise the impact."

Shipping dock squeezes inflicting domino effect Shipping to Vietnam’s key export markets is facing congestion in regional ports, with exporters encountering ever more challenges.

Cooperation vital to tackle shipping rates Although shipping rates have cooled down slightly, a lasting decrease is unlikely, meaning government support and more business efforts will be required to mitigate the impact.

FESCO to launch shipping line between Vietnam and Malaysia FESCO Transportation Group, one of the largest logistics companies in Russia, launched FESCO Intra Asia Service (FIAS) on August 15, a regular shipping line between Vietnam and Malaysia to expand foreign trade routes.