How is the shortage of containers causing the global freight cost to increase?

04/12/2020
The cost of transporting goods by containers on many major international routes has quadrupled in a short span of time.
How is the shortage of containers causing the global freight cost to increase?

Container congestion at ports going to Europe, America ... is bringing the global shipping industry into a serious container shortage crisis. Many units reported that they had to make use of old containers that should have been disposed of. Consequently, the cost of transporting goods by containers on many major international routes has quadrupled in a short period of time.

The impact of the crisis on the World

According to Nikkei, freight costs, including routes to Europe and the US, are likely to remain high because it will take a certain time, the shortage of shipping containers to be resolved.

As of mid-November 2020, the cost of transporting a 20-foot container from Shanghai to Singapore was estimated at $ 802, up 370 percent from $ 170 just a month ago, according to data from the Shanghai Shipping Platform. So far, the cost of transporting container goods for small container shipping activities has remained stable.

According to data provided, Descartes Datamyne, container shipping activities by sea from Asia to the US in October 2020 reached a record high, up 23.3% year-on-year. last year. The cost of transporting a 40-foot container from Shanghai to the US has also remained high at $ 3,913 since July 2020.

In addition to the imbalance in import and export, a series of services of shipping lines have been cut this year, resulting from the Covid-19 pandemic, leading to the time to move empty containers to the Vietnamese market, along with other Other exporting countries in Asia are stretched.

 

As Takuma Matsuda, a professor at Takushoku University in Tokyo commented that as furniture and equipment sales are on the rise, it seems that more and more retailers are stepping up stockpiling to prepare for the potential expansion of Covid-19.

The strong sale of goods into the US has created congestion at ports of this country, many containers have to wait a long time to be unloaded.

Usually, the volume of container freight is high in the period from August to October every year before the busiest shopping season in America, then it will go sideways. However, this year, although it is now late November, the volume of goods transported remains at a high level.

"I've never seen such a high demand for freight at the same time of the year. We have been forced to use an old container that is normally thrown out," said the director of a shipping company.

 

Meanwhile, Vietnam remains one of the most attractive locations for multinational manufacturers moving away from China, reinforcing the long-term outlook for seaport throughput.

The recovery of the seaport industry paralleled positive growth in Trade activities in Vietnam

Before the Covid-19 pandemic, Vietnam was, in fact, seen as an attractive destination for many multinational manufacturers who intend to leave China due to the impact of the policy. US tariffs

Most notably, businesses can benefit from preferential corporate income tax (CIT), exemption from import tax on fixed assets; and land rent exemption. Notable incentives include a 20% corporate income tax exemption for the first two years and a 50% reduction for the next four years. In addition, investment projects in priority industries (such as high-tech sectors) or in special economic zones / economic regions can enjoy 10% CIT for 15 years, exemption from tax in The first 4 years, and 50% tax reduction in the next nine years.

Along with that, the next direct catalyst is that Vietnam already has trade agreements with 52 countries and 13 free trade agreements (FTAs) including 11 already in effect.

With good control of the Covid-19 pandemic and the EU-Vietnam Free Trade Agreement (EVFTA) officially taking effect this year, Vietnam has become even more attractive to investors in the field. manufacturing. This has made the occupancy rates of industrial zones in the Northern and Southern key economic regions increased significantly in the first half of 2020.

It is expected that the wave of relocation from China to Vietnam will continue in the coming years. This will be a key driver to boost cargo throughput at seaports and other logistics services in the long term.

 

Vietnam's key container port saw positive growth again in the third quarter of 2020

On the domestic side, key container terminals regained positive growth in volume in Q3 / 2020, in line with a recovery in trade activity since June.

According to VDSC, the cumulative volume of container throughput at seaports in the first 10 months of 2020 increased by 6%, reaching nearly 15 million TEUs. Among key container port areas, container throughput at Vung Tau ports saw the strongest recovery in growth rate, continuing to maintain nearly 30%. This result is because Vung Tau is home to many deep-water seaports serving many direct routes to the United States (both the West Coast and the East Coast), along with the export value to the US will surge dramatically in 2020.

Currently, Vietnam ranks second among exporting countries to the US, only after China, increasing the market share of exporting countries to the US to 5.5% by 2020. With this growth momentum, Vung Tau will soon overtake Hai Phong and became the second most important container port area in Vietnam.

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