Vietnamese firms exporting to Europe and North America’s East Coast are being affected by Red Sea route changes, according to the Shinhan Securities Vietnam (SSV).

As per the company, listed seafood and textile companies will experience minimal impact, with their transport costs accounting for less than 5% of the total operational ones. Meanwhile, the turmoil in the Red Sea – a crucial maritime route connecting the Mediterranean to the Indian Ocean facilitating trade flows from Europe to Asia – has led to a significant increase in transport fees, benefiting maritime transport businesses in the short term.

The ongoing tension in the area also supports an upward trajectory in oil prices, which has a positive impact on upstream, oil refining, and oil transport companies.

According to some exporters, a number of shipping companies have announced higher costs for goods transportation to the US, the EU, and other countries from January 2024, citing the reason that the Red Sea tension has affected the safety of many routes and forced them to divert routes, which has subsequently led to longer delivery and higher expenses.

Large shipping firms like Yang Ming Line, One, Evergreen Line, HMM, and Maersk have informed exporters of additional charges as they have to divert Asia-Europe routes away from the Red Sea and the Suez Canal.

Tran Thanh Hai, Deputy Director of the Foreign Trade Agency at the Ministry of Industry and Trade (MoIT), said the Red Sea tension could raise the shipping cost for one cargo container destined for Europe by 1,000-2,000 USD, and the commodities hit hardest include textiles-garments, footwear, wood products, and electronic devices.

Therefore, the exporters using long routes need to take timely response measures to avoid losses, he said.

To protect their interests, the MoIT has urged business and logistics associations to keep a closer watch on the situation so that their members stay updated with developments to ready production, export, and import plans to avoid adverse impact.

They were also recommended to discuss with partners to extend goods preparation and delivery time if necessary, diversify supply sources to minimise impact on supply chains, and consider rail transport to have more transportation choices, Hai noted.

In particular, the MoIT advised businesses to include articles on compensation and liability exemption in emergency cases when negotiating and signing trade and transport contracts. They were also advised to buy insurance in anticipation of risks and losses during prolonged transportation or unexpected incidents, and ready different transportation plans.

VNA