Experts are warning of potential declines in Vietnam’s major exports to Europe and the Middle East, such as garments, coffee, and smartphones, due to worsening disruptions in Red Sea shipping and rising freight costs.
Pham Quang Anh, CEO of garment firm Dony, highlighted the significant delays in shipments caused by conflicts in the Red Sea region.
A journey that typically takes 28-30 days now extends to three months due to shipping delays.
Freight rates have surged, with costs for a 40-foot container skyrocketing to US$5,300 from $1,400 at the end of last year.
Transport expenses from Vietnam to Europe have also surged, nearly tripling for routes to Hamburg, Germany.
The disruptions have led to longer shipping routes, such as the Singapore-Rotterdam route taking 36 days instead of the usual 26, as vessels navigate around Africa’s southern tip.
Garments and footwear exports, which heavily rely on sea transport due to low profit margins, are particularly affected. Air transport is not a feasible alternative for these goods.
Financial services provider HSBC predicts that shipping disruptions will worsen in the second quarter, impacting all exports to Europe and the Middle East, including major commodities like coffee and smartphones.
Increased costs and disruptions are expected to erode the competitiveness of Vietnamese exports, according to experts and officials at the 12th Ocean Dialogue.
Dr. Irfan Ulhaq and Dr. Majo George from RMIT Vietnam emphasize the need for businesses to reassess their supply chains and explore alternative shipping routes or technologies like AI and blockchain.
In the meantime, many exporters are resorting to air transport or shifting focus to domestic and other markets with less logistical challenges until the shipping disruptions are resolved.
