Sea freight rates cool, port volumes break records

A view of a seaport in Bà Rịa – Vũng Tàu Province. — VNA/VNS Photo

HÀ NỘI — The Việt Nam Maritime Administration (VMA) said that sea freight rates have decreased recently, dropping by about 4 per cent compared to the previous week. 

The import and export of cargo through seaports grew dramatically, reaching the highest level in the past five years.

VTC News reported that in the first seven months of 2024, the volume of goods passing through Vietnamese seaports is estimated at 501.117 million tonnes, up 16 per cent over the same period in 2023. Container cargo throughput is estimated at 16.902 million TEUs, a 21 per cent rise over the same period.

“This is the highest growth rate in the past five years and is three times higher than the average growth rate in the past five years of 5.5 per cent,” a spokesman for the VMA said.

“The Cái Mép – Thị Vải deepwater port area saw a 41 per cent increase in container cargo, reaching 2.8 million TEUs compared to 2023. The Lạch Huyện port area recorded 875,000 TEUs, an 87 per cent increase over 2023.”

By the end of July, sea freight rates had decreased across all routes, with the most significant drop being on the Asia-to-West Coast of the US route, where rates fell by 20 to 30 per cent. Other routes saw reductions of around 15 to 25 per cent.

The reason for the decrease in freight rates is that shipping lines have increased their capacity and the pressure from the peak season has lessened, according to Việt Nam National Television (VTV).

The VMA forecasts that this downward trend in freight rates will continue.

Previously, sea freight rates on major routes skyrocketed. At one point, the cost of shipping a container to Europe reached US$4,000-5,000, more than double the rates at the end of last year. Similarly, shipping rates to the US rose to $6,000-7,000 for a container.

Transport costs per container to closer destinations including China, Japan, South Korea and Southeast Asia increased by $1,000-2,000.

According to the VMA sea freight rates are driven by market supply and demand dynamics. Given Việt Nam’s highly open economy, the country is a crucial link in the global supply chain and thus, shipping rates for goods through ports in Việt Nam are subject to global trends.

Most Vietnamese import-export businesses do not directly pay shipping costs. However, the high freight rates have forced them to adjust their product prices, affecting their competitiveness in the market.

The VMA has noted that the rate of direct bookings for import-export goods made by Vietnamese businesses is low. Most transactions involve purchasing under CIF (Cost, Insurance, and Freight) terms and selling under FOB (Free on Board) terms, accounting for over 80 per cent. Foreign partners typically handle the logistics contracts and pay the shipping costs.

The VMA added: “Vietnamese businesses that sign long-term shipping contracts with carriers are typically large companies with stable import-export volumes. Their long-term contracts are unaffected by market price fluctuations and freight rates remain stable throughout the contract duration.

“In contrast, smaller businesses with unstable cargo volumes will be directly affected by freight rate fluctuations.

“Additionally, some businesses do not sign contracts directly with shipping lines but work through forwarders as they provide additional services beyond transportation. As a result, smaller businesses often bear the additional freight rate difference.”

Given this situation, the VMA advises Vietnamese enterprises to establish long-term contracts with international partners to mitigate the impact of freight rate fluctuations.

Industry associations should orient their members in production activities, serve as a central point for aggregating goods from businesses and negotiate stable, long-term shipping contracts with carriers to minimise the risk of price fluctuations. — VNS