Shortage of empty containers challenges exporters

The lack of empty containers and rising transport costs mean enterprises face many difficulties. Photo: Thu Hoa

Misery due to lack of containers

Overcoming difficulties in the export market to get new orders at the beginning of 2021, but many businesses face difficulties due to the lack of empty containers for exporting goods and rising transportation costs. In addition to fees that are currently twice as much as previously, businesses also have to pay high prices for shipping lines (some shipping lines charge US$1,000/container).

The impact of the Covid-19 pandemic reduced the production capacity of regions such as Latin America, Eastern Europe, and South Asia, so the US and Europe increased imports from East Asia, including China and Vietnam. However, the decline in handling capacity of ports in Europe and North America led shipping lines to cut flights and cargo space.

Mr. Huynh Quang Thanh, General Director of Hiep Long Wood Co., Ltd., said that the shortage of empty containers is getting more and more serious, leading to a sharp rise in sea freight rates to European routes.

Many businesses said that at the beginning of 2020, when exporting goods to the US, shipping costs for shipping lines were only from US$1,800 to US$2,200/40-foot container. Now, shipping lines have increased to US$5,500 and up to US$6,300/40-foot container to America, and US$8,000/container to Europe.

On some European routes, the package freight has soared to US$10,000/container, up sharply from the previous level of US$1,800-2,000/container.

The price is high, but it is still difficult for enterprises to book containers. Luckily, Hiep Long Wood Company signed a FOB contract, so the ordering of the containers and the shipping costs are all on the importer. However, in the face of skyrocketing freight rates, many importers were forced to postpone delivery times and wait for freight reductions. Only a few importers, because they have run out of stock for sale, are forced to accept import goods at high freight rates. This causes the company's inventories to increase significantly.

Similarly, Mr. Do Minh Thien, director of Ngu Lam Viet Production and Trade Co., Ltd., said that the company currently has about 100 containers of wood products that have not been exported to the US and Europe due to increased fees.

For enterprises that export fresh products such as fruits and vegetables, the failure to place containers for export on schedule also affects the quality of goods. Mr. Nguyen Dinh Tung, Director of Vina T&T Group Company, said that sea freight rates to Australia and Europe routes have tripled compared to the previous period, but it is still difficult to find empty containers for export. Currently, the company has to flexibly export to other markets to deal with this situation. The increase in freight rates also seriously affected the business performance of the company when the export price was signed before, now the sudden increase in freight rates caused many shipments to lose out.

Cashew and tea exporting enterprises said they cannot export to key markets when the fee increases 6-7 times, from US$700-800/ container to more than US$4,000-5,000/container. Many shipping lines announced service cuts on some routes and have no plans for 2021. The increase in charter rates also has the effect of increasing port charges and surcharges such as handling charges (THC), container imbalance fee (CIC), peak season surcharge. These fees are incurred by Vietnamese enterprises.

Shipping lines also "give up"

On the side of shipping lines, there are also many reasons leading to the current shortage of empty containers. Ms. Do Thi Thanh Xuan, in charge of export documents, Branch CMA CGM (France) in Vietnam said that the lack of containers is a common problem for shipping lines today. The reason is due to the impact of the Covid-19 pandemic, which made the demand for basic necessities of the US and EU increase. Therefore, Vietnamese enterprises are rushing to export goods to these markets. In addition, the uncertainties in relations between the US and China have caused importers to divert their purchases in markets outside of China, including Vietnam and other Southeast Asian countries.

Ms. Xuan thinks this situation will continue. Currently, the CMA CGM shipping line has increased the rotation of empty containers to Vietnam 2-3 times over the normal supply, but still cannot meet demand.

Meanwhile, Mr. Nguyen Trung Nghia, Deputy Director of the Sinokor shipping line, said that in previous years, there was also a shortage of empty containers due to a surge in exports. However, the situation this year is much more serious and is expected to last. Mr. Nghia said that China's increased collection of empty containers for storage to cope with the shortage of empty containers has caused neighboring countries to fall into scarcity, including Vietnam. Although shipping lines have tried hard to move empty containers from other countries to Vietnam, the supply is scarce. The shortage of supply, while the demand is great, has pushed the freight rates up according to the law of supply and demand.

According to forecasts of the Ministry of Industry and Trade, the shortage of ships and the shortage of empty containers may last until March 2021, even when the Covid-19 pandemic is not controlled, continues to spread around the world, many expect this situation will last longer. The Covid-19 blockade in countries has resulted in a shortage of manpower to handle the goods, so empty containers are stagnant in North America and Europe while shortages in China and East Asia, pushing up container rental rates. On the other hand, the capacity to receive and manage empty containers of Vietnamese enterprises is limited, there is no large empty container depot, while small and scattered depots cannot meet the demand for packaging export.