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Container cost chaos adds to baulking domestic limitations

Exporters in Vietnam are in urgent need of more containers

The container crisis is causing headaches among exporters who are trying to ensure their delivery schedules in the year-end shopping season. However, the global demand vastly outruns supply, with plans of local steelmakers to support the market with more empty containers representing merely a feeble silver lining.

The reopening of the Meishan Wharf at Ningbo-Zhoushan Port in China on August 25 has raised optimism among Vietnamese exporters, who are now hoping that the shortage of containers will soon end thanks to shortened turnaround times.

Vietnamese manufacturers have spent more money on their deliveries to foreign buyers amid the aftermath of the cargo ship stranded in the Suez Canal in March – the effects of which are still being felt today. Moreover, the previous closure of the Meishan Wharf had exacerbated the shortage of containers and thus affected Vietnamese exporters.

A few months earlier, Minh Hai Seafood JSC had reduced its shrimp exports to the United States due to the high transport costs. Last November, Minh Hai only had to pay about $3,600 per container to the US, but in March this fee increased to $7,000 and has now reached $11,500. Prices for refrigerated containers increased even more. While in April one container would cost about $7,500 to the US, the first week of July saw rates as high as $14,000 per container.

The goods flow mainly from Asia to the US and Europe, while the reverse direction sees significantly lower shipping, which is one reason for the slowdown and shortage of containers.

Nguyen Van Sang, CEO of Home Furnist JSC said, “The shipping prices to the German market are now almost at the value of the goods, which renders the situation more difficult. In addition, businesses often have to make several appointments before even receiving a container.”

The imbalance of supply and demand in the market causes the fees for shipping containers to increase. Le Kim Cuong, deputy director of Tan Cang Logistics JSC, found that the capacity of deepwater ports to receive empty containers remains limited. Ho Chi Minh City, Dong Nai, and Binh Duong have about 50 empty container depots, but only about a fifth of them is capable of directly receiving empty containers from deepwater ports.

According to statistics from the Vietnam Maritime Administration, the transport fleet under Vietnamese flag has currently 1,049 ships at a total of about 9.3 million deadweight tonnage, of which only 38 are container ships.

“The lack of containers may be prolonged because the pandemic has not been controlled in many parts of the world,” said Tran Thanh Hai, deputy director of the Foreign Trade Agency under the Ministry of Industry and Trade.

Price hikes

Hai said that container rental prices have increased due to two factors. Firstly, because of the pandemic and social distancing, the cargo handling capacity at EU and North American ports decreased, causing shipping lines to cut routes and shortages with empty containers. The turnaround time for a container has increased to more than 100 days, from previously 60 days, due to quarantine policies in countries around the world.

Secondly, while the pandemic has caused production capacity in Latin America, Eastern Europe, and South Asia to decrease, the US and EU have increased their imports from East Asia, including China and Vietnam.

In addition, Vietnam has one major weakness in international forwarding as “there is not a single large enough empty container depot, only small-scale and scattered facilities,” said Hai. “These small depots cannot meet the demand for exports, and thus the capacity to receive and manage empty containers of Vietnamese enterprises remains limited.”

Meanwhile, Vietnam also has very few businesses that build and repair containers, especially specialised containers, so they have to depend on foreign shipping lines. The country has made efforts to partially improve the shortage of containers, but has not been able to meet the demand for the year-end shopping season.

According to Cuong of Tan Cang Logistics, many regions need to actively use new facilities to avoid congestion and shortages when concentrating demand on one port. At the moment, SNPL is active in shipping lines between Cai Mep Port and the Tan Cang Long Binh depot, as well as at other depots such as Song Than, Nhon Trach, and Hiep Phuoc.

Hopes for improvement

The world’s major container manufacturers, including the three Chinese manufacturers that supply about 80 per cent of the global shipping containers – CIMC, DFIC, and CXIC – are at maxed-out capacity. However, the supply of containers is still not enough to immediately reduce disruptions.

UK-based Drewry Shipping Consultants estimates that global container throughput in 2021 will reach a record high of more than 4.7 million twenty-foot equivalent units (TEU), much higher than the 4.42 million TEU in 2018 and up to 52 per cent higher than the 3.1 million TEU delivered in 2020.

According to Drewry, prices for new containers are increasing sharply at $6,160 per 40-foot container, up 90 per cent on-year. Usually, carriers will lease containers for up to 10 years. However, the current shortage of empty containers has made carriers tend to prolong their rental period.

A part of the missing containers could be added in the second quarter of 2022, when Hoa Phat Container JSC puts its first products on the market. Vu Duc Sinh, director of the company, said that the advantage of scale and its initiative in acquiring raw materials could ensure more affordable empty containers, able to compete with Chinese producers.

Hoa Phat had detailed plans for container production in 2020, when the first price hikes amid the pandemic occurred. Hoa Phat’s factory has a capacity of 500,000 TEU per year, focusing on popular containers with a length of 20-40 feet.

However, the current shortage of empty containers will only be resolved when the container turnover cycle returns to normal, and this can likely only be achieved by late 2022, according to forecasts of transportation experts.

In the first six months of 2021, the volume of goods through Vietnam’s seaports was estimated at more than 425 million tonnes, up 6 per cent over the same period in 2020. In which, exports reached more than 106 million tonnes, up 9 per cent, and imported goods reached over 133 million tonnes, up 2 per cent over the same period last year, marking a stable growth during the pandemic.

For container cargo alone, the throughput of seaports was estimated at 14.7 million tonnes, up 21 per cent over the same period in 2020, in which export containers hit a volume of more than 4.8 million tonnes, up 20 per cent. Meanwhile, imported container cargo reached more than 4.7 million tonnes, up 21 per cent.

Some seaports have increased their throughput volume, such as Thai Binh (up 65 per cent), Dong Thap (up 56 per cent), and Quang Ngai (up 38 per cent), among others.

VIR