“The Nightmare” of train fares returning through the perspective of “King of Spending” Phan Minh Thong

The ongoing conflict between Hamas and Israel has driven up transportation costs and presented challenges for exporters. According to Phan Minh Thong, the CEO of Phuc Sinh Corporation, the freight rates for agricultural goods shipments to Europe and the Americas have skyrocketed, surpassing the shock caused by the Covid-19 pandemic.

In early 2019, when the Vietnamese economy was booming and businesses were thriving, Thong stated that the freight rates from Ho Chi Minh City to major European ports were quite attractive at around $600 per 20′ container.

By February 2019, the rates had increased to $800 per 20′ container when shipping to Hamburg. At this point, most exporters did not react much as the price hike was still deemed reasonable.

Nevertheless, when the rates jumped to $1,000 and then $1,500 per 20′ container, exporters became alarmed. Not only were the costs skyrocketing, but shipping companies also began playing psychological games by claiming vessel shortages. This meant that space on board was limited, and companies had to accept whatever prices were dictated to them.

Thong explained, “On one hand, shipping companies claimed there was no space and reduced the number of vessels, forcing buyers into a corner with no alternatives. On the other hand, they warned that rates would continue to rise. At that point, exporters were unsure whether to proceed or wait for rates to drop. With rates soaring to $900 per 20′ container, which equaled a 150% increase, profits from exports were minimal. Agricultural products are typically sold at low prices in the flat world, resulting in very thin profit margins. Accepting shipping rates of $1,500 per 20′ container would mean a loss of $900 per 20′ container compared to initial calculations, and with hundreds of thousands of containers being shipped, the losses were substantial.”

In 2020, as the Covid-19 pandemic spread throughout Europe and the United States, causing thousands of deaths and lockdowns in cities worldwide, shipping companies took advantage of the situation and further increased rates. The rates jumped from $1,500 to $4,950 per 20′ container.

In 2022, the rates soared to $8,000 and even $9,000 per 20′ container due to the operational difficulties caused by the Covid-19 pandemic. In general, shipping rates to the United States increased from $2,250-$2,350 per 40′ container in 2019 to a staggering $21,000 per 40′ container in 2022. Some customers had to pay up to $25,000-$29,000 per 40′ container.

Phuc Sinh Corporation, for example, normally paid around 3.2 billion VND per month in shipping fees in 2019. In 2022, the company had to pay approximately 32 billion VND per month, a tenfold increase. Looking at the larger picture, Vietnam being the world’s largest exporter with a wide range of goods, including seafood, rice, coffee, footwear, furniture, pepper, vegetables, and cashews, suffered even greater losses.

Thong revealed that while hundreds of thousands of exporters struggled with the exorbitant shipping costs, leading some to operate at a loss or go bankrupt, all shipping companies, such as MSC, CMA, and Maersk, were making huge profits.

CFR/CNF: Goods are delivered with the payment for goods and freight, meaning the seller has cleared the export customs, loaded the goods onto the carrier provided by the shipper at the loading port, and paid the freight charges to transport the goods to the destination port.

In 2023, Thong found himself in a similar situation once again. In October 2023, while attending a trade fair in Cologne, Germany, he heard news of the Hamas-Israel conflict. As a result, he received information that the shipping rates from Ho Chi Minh City to Hamburg had jumped from $700 per 20′ container to $1,500 and then to $4,100 per 20′ container (an increase of 6 times). This reminded him of the horrific shipping rates experienced in 2020-2022.

Certain shipping companies even imposed additional “war charges” on their freight rates. Rates to New York, for instance, increased from $2,200 per 40′ container to $5,000 and $7,100 per 40′ container.

“Instead of going through the Suez Canal, shipping companies now have to go around the Cape of Good Hope, which is a longer route, but the rates cannot increase so significantly!” shared Phan Minh Thong.