Delta Variant Paralyzes US Biggest Outsourcing Partner!

Since 2010, Vietnam’s exports to the US have quadrupled to $77 billion, ranking it as the US biggest outsourcing partner, especially in apparel and footwear manufacturing.

The US began sourcing more from Vietnam in recent years, including apparel and footwear, electric machinery, and leather goods, when many manufacturers moved production there because of rising US tariffs on China and increased labour costs in China.

Due to surging Vietnam COVID cases in recent months, big apparel and footwear manufacturing companies are increasingly trying to switch to air transport in order to ensure imports arrive on time for upcoming peak shopping seasons. As a result, air cargo freight rates climbed rapidly because of the spike in demand for air cargo capacity, FreightWaves said.

Escalating Vietnam COVID cases in the most recent months have also resulted in a decrease in air cargo capacity.

The pandemic precautions have caused work slowdown at Vietnam airports. Consequently, passenger flights providing extra cargo space are scarce with extremely low travel demand. Furthermore, the government postponing granting landing permits also makes extra airlifts not feasible.

According to air cargo rates shared by TAC Index, the price to ship by air hovers around $4 per kilogram, but it has soared to between $8.5~$10 per kilogram and is expected to reach $15~$18 per kilogram very soon. Besides, renting an entire cargo plane from Vietnam to Chicago now costs at least $1.1 million.

Port labour shortages have emerged due to severe port congestion.

The abrupt outbreak of Vietnam COVID cases has brought about several main port congestion, including Ho Chi Minh, Cai Map and Cai Lai port, preventing dockworkers and truckers from getting their jobs done, and therefore slowing down productivity.

“Both Cai Map and Cai Lai ports are experiencing a labour shortage, and the vessel waiting time, as of last week, is about two to five days,” Everstream said.

Last Friday, 90 CEOs of leading US brands, including Gap, Nike, and Under Armour, signed a joint letter petitioning President Joe Biden to accelerate vaccine aid to Vietnam in order to minimize supply chain problems apparel and footwear manufacturing companies employing 3 million workers in the US.

SOURCE: FREIGHTWAVES