Govt tells exporters to ready contingency plans

HANOI: Ongoing tension in the Red Sea has hiked freight rates and increased the possibility of delays, according to Vietnam’s Industry and Trade Ministry.

The ministry urged Vietnamese exporters and industries to closely watch the situation in the Red Sea, prepare contingency plans for import-export activities, keep close contact with foreign partners and diversify sources to protect their supply chains.

Exploring alternative transportation methods, such as rail transport, was also recommended.

In addition, it advised exporters to include compensation clauses and exemption of responsibility in emergencies. Meanwhile, insurance policies should be obtained to minimise financial risks.

Businesses were asked to contact the ministry if they required assistance.

To date, more than 170 ships have been redirected south towards Africa since Dec 20, with 35 delayed in the Red Sea, according to supply-chain management and logistics company Flexport.

The rerouting is expected to extend shipping time by 10 to 14 days, resulting in a significant increase in fuel and crew costs.

In light of these developments, businesses engaged in export and import should anticipate risks.

The tension in the Red Sea could lead to additional costs of US$1,000 to US$2,000 for a container passing through to Europe. Industries such as textiles, footwear and furniture may be significantly affected.

According to the Vietnam Ship Agents and Brokers Association (Visaba), container-ship operators are trying to avoid the risks around the Red Sea by sailing around Africa and facing substantial or novel additional fees.

According to Visaba, the Mediterranean Shipping Co plans to raise the shipping cost of one container from Europe to Asia with a surcharge, although it did not specify by how much.

Similarly, French shipping company CMA CGM is considering charging an additional US$2,700 per container to cover the costs of loading or unloading at ports in the Red Sea.

Even before the Red Sea crisis, shipping companies had planned to raise freight rates or even double them in some cases before the Lunar New Year in February.

The shipments are facing peak-season and war-risk surcharges.

It is anticipated that the fees would continue to rise as the number of delayed or rerouted ships continues to increase.

Recent incidents of attacks on cargo ships in the Gulf of Aden and the Red Sea have led some shipping companies to announce the suspension of cargo transportation through the Red Sea, rerouting around Africa.

The disruptions are having negative effects on international trade, causing delays in maritime shipments between Asia and Europe and the north-east coast of North America.

Freight charges and insurance fees for cargo between these regions are increasing.

Shortages of empty containers may also occur locally.

The Suez Canal connects the Red Sea to the Mediterranean and serves as the fastest route for transporting fuel, food and consumer goods from Asia and the Middle East to Europe.

This route is crucial for transporting about one-third of the global cargo, including toys, shoes, furniture and frozen food. — Viet Nam News/ANN