To our valued customers
In light of recent tightening of market pressures, we provide the following “market intel” to assist everyone with their supply planning for the remainder of 2024.
Vietnam, a top 10 trading partner with Australia, is the latest Southeast Asian country to report adverse impacts on supply chain operations due to the Red Sea shipping crisis emanating from the conflict in the Middle East.
Tran Viet Huy, managing director of Tracimexco – Supply Chains and Agency Services confirms that disruptions are affecting shipments from Asia to Australia but also Europe and some US routes. The lack of empty containers has impacted shipping line volumes and continues to slow vessel departures. Huy emphasised that some industries which have big volume of trade between USA, Europe and Australia are feeling the impact such as textiles and garments, agriculture, and seafood.
The shortage of equipment, delays caused by schedule changes and route disruptions is not only causing variations to departure and arrival times but are also having a direct impact on the cost of shipping. The cost of ocean freight to EU ports from Asia has increased from less than USD2,000 per 40-foot shipping container in December 2023 to over USD5,000 and over USD7,000 for the USA trade. We are seeing rates ex Vietnam to Australia now heading northward of USD3,500 per FEU. Additionally, we are seeing Shipping Lines impose a peak season surcharge of USD500+ per TEU effective July 2024.
Jan Segers, general manager of Noatum Logistics Vietnam Co., Ltd, said, “In the short term, Red Sea shipping disruption is increasing the rates by adding a ‘war risk’ surcharge or by going via the Cape of Good Hope route which is longer and needs more fuel.” He further noted that the Red Sea issue is being escalated and may last for years. “It will be difficult for buyers and sellers to adopt different strategies to deal with it. However, the challenge facing shipping lines needs collaboration at a government level.”
According to Fitch Ratings, shipping costs have increased by more than 200 per cent since April/May as a result of disruptions to maritime traffic and the additional Red Sea issues. These increases are likely to be reflected in rising import prices in the coming months, and longer shipping times will reduce supplies of intermediate inputs and consumer goods. The longer-term outlook for shipping costs is uncertain, but a plausible scenario is that they will remain high for several quarters and continue northward toward the end 2024.
Economist Brian Lee Shun Rong at Maybank said, “The Red Sea shipping disruptions are one risk worth watching, as any major and prolonged escalation may disrupt supply chains, inflate shipping costs and dampen trade. Indeed, rising tensions in the Red Sea have led to delivery delays and surging container freight costs, which may have disrupted shipments.”
BR International’s professional operations and customer service teams are working closely with staff at the Ports of Origin and directly with shipping lines to ensure that disruptions to your freight are kept to a minimum. Please do not hesitate to contact your friendly Customer Service professional to discuss and matters concerning your shipments.
