'Scandalous' new surcharge wipes out effect of carrier rate hike moratorium
The huge earnings of ocean carriers in the first half of the year will gather ...
As key agricultural industries feel the effect of the spike in freight rates and lack of empty containers, Vietnam is the latest country to question the prices charged by shipping lines.
According to local media, the Vietnam Maritime Administration (VMA) has set up a working group to “remove difficulties for export activities and ensure transparency in the listing of freight prices”.
VMA deputy head Hoang Hong Giang told the Vietnam News Agency: “The continuous increase in freight rates and surcharges has caused many difficulties for businesses, increasing transport and storage costs, affecting production and distribution of goods.
“It is now the peak season for exported goods, such as agricultural and aquatic products, but they are not delivered on time. Therefore, the contracts were cancelled by foreign partners.”
For example, Vietnam is one of the largest coffee producers in the world, but customs figures show a 46% year-on-year volume decrease for the first two weeks of January. And other key export commodities such as rice and fruit saw drops of 44% and 33%.
Shipper groups blame the lack of available containers and sky-high freight rates.
The Vietnam Association of Seafood Exporters and Producers said rates to European ports last month had jumped to $7,000, up from $2,850 in December. Rates to the US were $4,000-$5,850, it said.
Mr Giang said the VMA had published a document requiring shipping lines to list freight rates and charges “publicly and transparently”, but so far they had “not strictly” followed the regulations.
Vietnam maintained its impressive container shipping growth last year, with volumes up 10.6% to 14.65m teu. The concern now, however, is that this strong export performance could suffer from a breakdown in container supply chains.
Agricultural exporters also have to compete for space with the increasing number of multinational tech firms in Vietnam, in many cases moving production from China to the industrial hubs surrounding Hanoi and Ho Chi Minh City.
The latest capacity crunch has prompted calls for Vietnam to start producing containers itself to reduce dependence on international shipping lines.
Meanwhile, the country’s move to probe freight rates follows similar announcements from other major shipping jurisdictions, including China, India, Europe and the US.
According to Alan Murphy, CEO of Sea-Intelligence, anecdotal evidence suggests the Chinese authorities were able to intervene “with some success” and restrict carriers’ ability to keep raising rates.
However, he added: “The US authorities would be very reluctant [to intervene], and the jury is still out in the EU. The only thing we can say for certain at this time is that every major competition-regulating agency is looking at it, but that is not the same as concluding they will do anything about it.
“Generally, unless anti-competitive practices are present, and provable, most of these authorities would be unlikely to intervene at this point. Also, this is a double-edged sword in the sense that those same authorities would then also be forced to intervene if the market were to change in the shippers’ favour.”