The ocean freight rate is still on a downward trend, facilitating the cost reduction for importers and exporters. 

Production workers at the Da Nang Forestry Products Export JSC. Photo: MAI QUE

Ocean freight rates drop sharply

From mid-July until now, the cost of shipping freight containers by sea has decreased by 40 - 60% compared to the peak time at the end of 2021. Besides, the situation of difficulty in booking ships and scarcity of empty containers has decreased, not as stressful as before.

To Van Hiep, the Chairman of the Da Nang Land Transport Association cum Director of Green Lien Chieu Logistics Joint Stock Company explained that, in the previous period, the sea freight shipment rate increased sharply mainly due to port congestion and lack of workers. In major ports, now these difficulties have been removed.

In addition, inflation in Europe as well as political developments in the world led to a sharp decrease in the demand for goods in European countries, which prompted the volume of goods in circulation to go down, and that’s a practical reason for a plunge in the ocean freight rate. 

Currently, the freight rate for sea routes from Viet Nam to the US and Europe is about VND60 - 100 million /container, about one third of the peak price in 2021 with VND230-300 million /container and more. Meanwhile, that for the Viet Nam - China leg has also been reduced by VND30 - 50 million /container to only VND10 - 15 million/container.

At the end of 2021, the sea freight sometimes accounted for one-third of the value of containers, so import and export businesses also experienced a lot of profit reduction. But now, the cost is reduced, which is bringing more conveniences for businesses. However, most of the sea routes have formed a new price level, about 10 - 15% higher than the pre-COVID-19 period.

Le Hoang Khanh Nhut, the General Director of the Da Nang Rubber Joint Stock Company (DRC), said that the reduction in sea freight rates has a positive impact on businesses because it helps to reduce the cost of product composition. However, there are still difficulties, especially the fact that the logistics cost is decreasing in all markets around the world will stir up harsher competitiveness.

Therefore, the number of orders DRC received in September has decreased compared to previous months but not significantly. It is expected that DRC’s revenue in the third quarter of 2022 will still increase by 25% from the same period.

Sharing the same opinion, Mr. Bui Minh Vu, Head of Import-Export Department of the Foster Da Nang Electronics Co., Ltd acknowledged that the constantly-reduced freight rate helps businesses face fewer difficulties in booking shipping services, while fostering goods circulation, reducing freight rates and the shortage of raw materials in the production process as well as reliving input costs.

In particular, the reduction of sea freight rates creates favourable conditions for importers because most contracts usually stipulate that the importer is the party to bear the shipping costs.

There are still many challenges

Although there is an additional advantage brought about by the falling ocean freight rate, the number of orders enterprises have tended to markedly decrease over recent months. Mr. Ha Ngoc Thong, the Director of Asia Architecture and Trading Co., Ltd. said that although the business can still maintain orders, ensure job security and keep their staff on stable payroll, it is forecasted to find hard to achieve the growth target as initially planned.

Similarly, according to Mr. Huynh Trinh, the Director of Da Nang Forestry Products Export JSC, although it has entered a new production season, the wood and furniture industry is facing many difficulties when the consumption trend in the market is not high.

In the European and American markets, people are giving the priority to purchasing only essential consumer goods, the company is witnessing a down in the number of orders. Therefore, businesses cannot take advantage of the opportunity to reduce freight rates to increase orders.

According to Ms. Pham Thi Lan Huong, the General Director of Vinafco JSC, currently international sea freight rates have decreased but are still high compared to the time before COVID-19. Meanwhile, inland sea freight charges are still anchored at a high level with only some routes from the southern region relatively slightly decreasing. Normally, Viet Nam's sea freight rates will decrease 3-6 months behind other parts of the world.

Mr. Duong Tien Lam, Representative Office of Viet Nam Association of Logistics Service Enterprises in Da Nang, General Director of the Asiatrans Viet Nam Joint Stock Company, said that in the context of the disruption of the global supply chain, it is impossible to recover soon, the ocean freight rate will decrease but it will be in a slow manner.

In addition, warehousing costs have increased due to a growing demand for warehousing while the supply is not sufficient. This fact requires urgent solutions for businesses to reduce cost pressure and improve competition capacity of Vietnamese goods in the international market.

Reporting by MAI QUE - Translating by A.THU