Daily news: Sea freight rising, what is the impact of the global shipping crisis that is forecasted to last until 2023?

The shipping industry crisis caused by the COVID-19 pandemic makes shipping market unbalanced. It is pushing sea freight to record highs. After changing forecasts, experts said that the global shipping crisis will last at least until 2023. The shipping crisis has a global impact, including Vietnam and Malaysia. The two countries have come up with solutions to limit this impact.

Experts forecast: Global supply chains and ports will be congested at least until 2023

– Sea freight accounts for 90% of the world’s freight movement. Since the outbreak of the COVID-19 pandemic, the global shipping industry has remained in crisis. Empty containers are stranded and scattered across Europe and North America. However,  supply chain delays mean more containers are needed to move goods. At the same time, the demand for goods increased sharply, making it impossible for the worldwide network of ships; containers and freight trucks to keep up. As a result, containers have become incredibly scarce and extremely expensive. Congestion at ports has pushed up transportation costs. Until now, no one knows exactly when the global shipping industry crisis will end.

– The first predictions for a downturn were for October 2020 after China’s Golden Week holiday. Then it was post-Lunar New Year 2021, then mid-2021, then the end of last year, then post-Lunar New Year 2022. With Lunar New Year 2022 now underway and container freight rates, ship charter rates and port congestion still at or near all-time highs.

– Expecting in the shipping industry, maritime businesses have bought new container ships. The number of container vessels changing hands reached an all-time high in 2021 after shipowners appeared willing to pay almost any price to secure tonnage.

Many container ships are still stuck in the Red Sea

– Currently, while international trade is recovering, a large number of container ships are still stranded in the Red Sea. The latest report from the Kiel Institute for the World Economy (IfW) says that traffic jams on sea lanes continue to hamper the worldwide supply of goods and raw materials. 

– In the Red Sea, about 11% of all seaborne goods worldwide are stuck. In the context of international trade recovering strongly, even higher than pre-COVID-19 levels, this congestion shows a huge demand for transportation that supply cannot keep up. 

– One of the important reasons is that many container ports constantly closed COVID-19 pandemic. The Omicron variant of the rapidly spreading SARS-CoV-2 virus poses a threat to China. This has also raised concerns that delays in container handling in China will affect European and world trade. Experts predict that freight costs will continue to climb higher, causing adverse effects on consumer prices worldwide.

Rising sea freight in Malaysia makes the transportation process more difficult

– In Malaysia, international sea transportation accounts for 90% of total international transportation.

– Sea freight rates have skyrocketed along with rising commodity prices and labor shortages; driving up import input prices and export costs.

– Shippers face difficult decisions daily on whether to ship and incur high export costs or not to ship and lose their export markets. On the other hand, high freight rates have forced foreign customers to bear all the costs of transportation and insurance.

– In addition to the increase of sea freight rates, shippers also have to bear other logistics costs such as the warehousing, forwarding, haulage and landside charges which have increased in parallel to the freight rates. Pasir Gudang Port and Port of Tanjung Pelepas, have increased the port tariffs by 30% and 15%, respectively, on Oct 1, 2021.

– A survey by MNSC from October 7-10 last year showed that sea freight is now at an all-time high, having increased between 100% and 700% of pre-pandemic levels.

– The MNSC called on the government to help shippers mitigate the impact by providing grants to cover logistics costs, with double tax deductions from corporate taxes on freight costs.

Sea freight rates in Vietnam increase, and ways to solve this situation

– According to information from the Ministry of Transport, due to the complicated situation of the epidemic, some countries are currently applying measures to control trade. Many foreign seaports, especially in Europe and America, have millions of containers congested. Some seaports apply anti-epidemic measures, leading to longer turnaround times.

– These reasons lead to high sea freight rates, 3-5 times higher than before, and a global shortage of empty containers. In that context, Vietnamese import and export enterprises had to reduce the number of export goods.

After that, the Ministry of Transport has come up with solutions to reduce sea freight rates, develop a fleet sea ​​to improve the initiative for import and export activities and increase market share.

– The Ministry of Transport has presided over to inspect the observance of regulations on freight rates and off-price surcharges. Besides, with container shipping services by sea of foreign shipping lines, especially Europe and America, need to solve the congestion of goods at the port.

– The Ministry of Transport also speeds up the entry and exit procedures for ships; increases the efficiency of port operation; closely inspect, review and manage prices and fees. Moreover, they plan to reduce the price of pilot services, support domestic enterprises to produce empty containers.

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