Enterprises offer a plan to "cool down" sea freight rates

Enterprises offer a plan to "cool down" sea freight rates
Date Submitted: 09/08/2021 10:18 AM

The continuous increase of sea freight rates causes many export industries to "struggle" to fight and do not know when it will end. To cool down sea freight, there are many solutions proposed by businesses.

When will ocean freight cool down?

According to a study published recently by SSI Securities Joint Stock Company, sea freight rates to markets over the past 1 year have increased by about 4 - 8 times, even 10 times, affecting heavily to the shipping industry. export industries of Vietnam.

Analyzing the reasons for the high sea freight rates, SSI pointed out: Due to the prolonged Covid-19 epidemic, shipping companies have started to cut costs in the form of ships suspending operations, canceling trips and reducing costs. train speed to reduce fuel costs. This reduces capacity on a large scale for many major global shipping lines. Total container fleet capacity decreased by 18% in May 2020.

Enterprises offer a plan to

In addition, the handling capacity of ports has also decreased due to staff shortages and prolonged quarantine, leading to severe congestion at ports and delays in loading and unloading containers. In addition, social distancing and travel restrictions have been applied in many countries around the world, especially in the US and Europe, causing a significant reduction in production capacity in these countries.

The shortage of containers has pushed container rental prices to very high levels and some export companies even have difficulty finding empty containers for packing.

According to SSI, some short-term factors may decrease in the near future. The first is the pent-up demand after the epidemic and the increase in inventory imports in North America/Europe. There are usually two peak seasons for exports from Asia to North America/Europe, which are July (back to school season) and October (Christmas season). Currently, some airlines have started to apply peak season surcharges for these service routes. This is the short-term driver that has the strongest impact on the rate increase and SSI believes that this will not end until the end of 2021.

Second, social distancing and congestion at Chinese ports. Recent events in the ports of Yan Tian and Kaohsiung (Kaohsiung) are likely to be under control in a few weeks. Similar to the Suez Canal event, these local events put enormous pressure on the global supply chain and can take several months to resolve these bottlenecks. In addition, investors should watch for similar events - at least until the supply chain is replenished.

Third, India controlled the Covid-19 epidemic and restored production capacity. India's new Covid-19 cases have peaked and plummeted recently, and some regions are lifting some social distancing measures. However, it is difficult to predict with certainty when India can fully recover production capacity, because there is always a risk of a Covid outbreak, especially with the arrival of the Delta Plus variant.

In the long term, there are a number of factors that can lead to survival and keeping freight rates higher than the average level before the Covid-19 epidemic, including: Strengthening cooperation in controlling supply and prices between carriers due to more alliance formation and M&A in recent years. For example, CSCL and OOCL merged into COSCO Group, APL merged into CMA CGM, UASC merged into Hapag-Lloyd, and the formation of the ONE alliance, which includes K-Line, MOL and NYK. These moves have strengthened the strength of shipping lines, making it difficult for long-term transport bets to return to low levels like what happened in the period 2008-2019. Along with that, in the context of high oil prices, experts also predict that carriers will reduce speed when possible to save fuel, making container rotation slower and freight rates higher.

From the above analysis, experts predict that freight rates may peak in the fourth quarter of 2021, then adjust slightly in the first half of 2022. And in 2023, freight rates may decrease significantly due to the supply of new ships. put into operation, but maintained at a higher level than before the Covid epidemic.

Any solution for Vietnamese businesses?

In the face of current long-standing difficulties, Mr. Phan Van Co - Marketing Director of Vrice - said that in order to lower the cost of renting empty containers and sea-going ships, import-export businesses must link together to negotiate with each other. Carriers. When businesses link up and have large orders to go to a certain market, they will negotiate with shipping lines in this market. This helps shipping lines have stable orders, from which they will give priority to shipping businesses with better prices.

According to Ms. Nguyen Thi Kim Huyen - General Director of Global Maritime Services Co., Ltd., businesses must combine not only in the Vietnamese market but also across borders. It is combined with overseas logistics enterprises to be able to return empty containers faster and reduce the cost of empty containers. Because some shipping lines have the disadvantage that if they ship empty containers to Vietnam, the fee will be very high, so they want to reduce it by wanting to have "lining". In addition, the Government or the Ministry of Industry and Trade also need to search for different fleets with good prices and proposals for businesses.

From an expert perspective, Ms. Trang Bui - Senior Director of JLL - said that JLL has worked with shipping lines and suggested that they should evenly distribute fleets and containers to different markets to reduce the load on the freight. current pressure of business.

Enterprises said that if the above problems can be solved, freight rates will "cool down", thereby helping exporters have more opportunities.

Source: Mai Ca - Industry and Trade Newspaper




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