Freight Forwarders Should Know About The Recovering of Vietnam Exports!

Freight Forwarders Should Know About The Recovering of Vietnam Exports!

It is reported that Vietnam exports have started to recover after months of Covid-19 precautions, propelling the ocean freight rate to increase continuously. Now coupled with insufficient capacity, cargo owners and forwarders are even competing for cabins. 

Vietnam GDP has shrunk by 6.1% in the third quarter under strict pandemic regulations. Business leaders warned that if the authority concerned continues to maintain the blockade restriction, a large number of orders and investments will be lost.

FIGURE 1 | Annual Growth Rate of Vietnam

For example, the blockage restriction forced many local factories to shut down, affecting the Vietnamese garment industry’s exports in September, which fell 18.6% year-on-year.

However, Vietnam’s exports show amazing flexibility after the authority suspended the strict precautions. According to the Ministry of Trade, Vietnam exports are estimated to increase by 10% to USD 600 billion in the fourth quarter.

According to the general manager of Vietnam’s logistics company Noatum, the reopening of local factories will further facilitate Vietnam’s economy.

FIGURE 2 | Vietnam Manufacturing PMI

The end of the year in Western countries as well as the Lunar New Year in Vietnam, are expected to drive massive demand for goods. Therefore, the scarcity of container ships and cabins will continue to push up the freight rates.

Freight rates are still rising and may continue until January of next year. For example, a 40-foot container from Ho Chi Minh City to Los Angeles or New York costs around USD13,000 and USD 16,000 respectively. 

Furthermore, shippers with a fixed contract rate of USD12,000/FEU from Haiphong, Vietnam to Europe are unable to book a cabin because the spot rate has exceeded USD14,000.

You may be also interested in Should Shippers Choose Contract Rates Over Spot Rates?

The freight rate may fall and stabilize to a new normal level, but it will not return to the previous low level. It all depends on the port congestion in the U.S. and Europe. The containers will be able to return to Asia once the problem has been resolved.

FIGURE 3 | Global Container Freight Index 2021 vs. 2020

According to Cargoteam, a freight company in Ho Chi Minh City, shippers and freight forwarders are “fighting” for containers and cabins, and freight rates are about five times higher than before the outbreak. 

What’s worse, carriers don’t adhere to contract rates and don’t allocate any new capacity to the market because Vietnam is not a high priority in comparison to China, which gives them a fortune. As a result, operators must fight for their customers every day.

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