In a significant shift within the global shipping industry, freight rates have seen a steady decline across various routes. With the most notable decreases observed on the Asia-US West Coast and Europe routes. Current freight prices have dropped by approximately 20-30% compared to previous rates, while other shipping routes are experiencing reductions of about 15-25%. Compared to September 2021, current freight rates have plummeted by up to 44%.
Deeply reduced ocean freight rates ‘boost’ export growth at the end of the year.
Current Rates
As of now, freight costs from Europe range between $6,000 and $8,000 for a 40-foot container. While shipments from Asia to the US West Coast are priced between $5,000 and $6,000 per container. In contrast, the US East Coast route remains notably higher, with rates from $9,000 to $10,000 per container.
Mr. Do Tuan Anh, Deputy General Director of Dai Dung Construction and Trading Mechanical Joint Stock Company in Ho Chi Minh City, highlighted the impact of falling freight rates on their business. Previously, the cost of shipping a container of furniture to the US and Europe was around $11,000. This has now decreased to between $6,000 and $8,000 per container. Mr. Tuan Anh noted, “The decrease in sea freight has helped businesses increase the export output of construction steel by more than 20% to markets in the US, Europe, Canada, and Japan. We expect export orders to rise by more than 10% in the near future.”
Factors Behind the Decline
The surge in freight rates in the past was primarily attributed to shipping lines altering their routes to avoid the Suez Canal due to security concerns in the Red Sea. This change led to longer transportation times and increased costs, forcing many businesses to refuse orders. However, with more ships now able to navigate directly to the US and Europe without detours, both transportation time and costs have decreased significantly.
The Vietnam Maritime Administration has reported that freight rates are dropping at an average of 3-4% per week. This trend reflects a stable decline and is expected to persist as congestion at major ports worldwide is resolved. Such developments are considered a positive signal for the Vietnamese market. This is offering numerous advantages to customers by lowering transportation costs, facilitating bookings, and enhancing operational efficiency for shippers.
The ongoing decline in freight rates is poised to create a favorable environment for international trade. Businesses can look forward to reduced shipping costs and increased export opportunities, particularly in sectors such as construction and manufacturing. As the global shipping landscape stabilizes, companies will likely benefit from improved logistics, paving the way for more robust economic growth in the coming months