August 26, 2019 00:51

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Why are Vietnam freight shipping charges to Australia higher than other countries?

09:31 | 01/03/2018

VCN- Vietnamese enterprises are subject to hundreds of dollars higher freight costs than China or other countries in the region which have equivalent distances when importing and exporting goods to the Australian market.

why are vietnam freight shipping charges to australia higher than other countries
Cai Mep - Thi Vai is a deep water port capable of receiving large tonnage ships to transport directly to export markets without transferring to third countries. Photo: Thu Hoa.

The paradox of "short roads, high cost"!

Currently, freight rates from the port area of HCM City to Sydney (Australia) with a distance of 4,577 nautical miles is at $US 1,141 per container (for a 20 ft container) and $ 1,703 per container (for a 40 ft container).

According to Vietnam Port Association (VPA), this rate is higher than the freight from Shanghai, Hong Kong (China), or Thailand, Singapore to Sydney. While the distance between transport routes is quite similar, even some of these routes have longer distances but the charges are still lower.

For example, the distance from Shanghai port (China) to Sydney is 4,632 nautical miles, but the freight is only $US 911/20 ft container ($US 230 difference compared to the charge from HCM City) and $US 1,360 / 40 feet ($US 343 difference compared to the charge from Ho Chi Minh City).

Or from Bangkok (Thailand) to Sydney with a distance of 4,984 nautical miles (compared to 4,577 nautical miles from Ho Chi Minh City), but the freight rates are still much lower than the amount paid by Vietnamese companies when transporting goods from HCMC. Specifically, the cost from Bangkok to Sydney is $US 973/20 ft container and $US 1463/40 ft container, $US 168 and $US 240 difference compared to the charge from HCM City, respectively.

Being subject to the millions of VND different costs per container (a few hundred dollars) when importing/exporting goods with Australia makes Vietnam enterprises face more difficulties, especially in the context that many domestic enterprises are still medium and small size. The higher fees that result in higher costs also reduce the competitiveness of Vietnamese goods in the Australian market.

High charge due to small vessels

According to the VPA, sea freight rates are negotiated by shipping companies with cargo owners and depend on a number of factors such as volume and value of the cargo. "High value goods may be subject to higher freight rates, larger consignments may be entitled to more discounts, goods of traditional cargo owners may be subject to preferential treatment by the shipping companies...”,-a representative of the VPA said.

On the other hand, freight rates depend on distance, vessel size, transport routes which go straight or through transshipment...

Though, given the many reasons for talking about freight rates, the VPA acknowledges that under equivalent conditions of consignments and transportation, Vietnamese goods exporters to Australia may be subject to higher prices than Chinese (about $US 500 difference) due to the use of smaller vessels under 4,000 TEUs and transhipment to Singapore.

"If there is enough cargo for the shipping company to launch a direct route between Vietnam and Australia by large vessels through the Cai Mep deep-water port (Ba Ria-Vung Tau), each Vietnamese import/export container will be reduced by $US 200 when competing with import/export goods from China. The issue is how this benefit will be shared among the foreign shipping companies, Vietnamese cargo owners and Vietnamese seaports”, said the representative of Vietnam Ports Association. Apart from the above contents, the VPA recommends the functional agency to further clarify the difference in freight to Australia between Vietnam and some countries in the region.

Currently, Australia is one of the leading trading partners of Vietnam with export turnover of $US billions per year, so reducing costs, facilitating the business community will help Vietnam companies exploit efficiently this important market.

Regarding freight rates from Vietnam to Australia higher than other countries in the region recently that were reported by the media and the proposals of the VPA, the Office of Government has requested the Ministry of Transport, the Ministry of Finance to consider, handle and reply in writing to the Association.
According to statistics of the General Department of Customs, in 2017, the total value of imports and exports turnover between Vietnam and Australia reached nearly $US 6.5 billion. In particular, Vietnam's export turnover reached nearly $US 3.3 billion and imports reached nearly $US 3.2 billion. In January, the export turnover of Vietnam reached $US 305 million, import turnover reached $US 290 million.

By Thái Bình/ Kiều Oanh