How does the Russian-Ukrainian conflict affect the Vietnamese maritime industry?

This is one of the comments of the Vietnam Maritime Administration regarding the impact of the Russian-Ukrainian tension on Vietnam’s maritime industry.

According to this agency, from mid-February 2022, when tensions between Russia and Ukraine arose, fuel prices rose worldwide, up 50% year on year, reaching the highest high in recent years.

For the shipping industry, the price of fuel accounts for the largest proportion of total costs, about 35-45% of the cost structure, so rising fuel prices will have a significant impact on business operations.

According to a report by Vietnam National Shipping Lines, the average prices of Ultra Low Sulfur Fuel Oil (VLSFO) and High Sulfur Fuel Oil (IFO380) in the first two months of 2022 increased by 43-50%. year-over-year due to the impact of crude oil production cuts in the world’s largest oil exporters.

More than 10 days after February 23, 2022, the average price of VLSFO in the world fell from 133 USD to 888.5 USD/ton and the price of IFO380 also fell from 74 USD to 653 USD/ton. High fuel prices will increase costs and significantly affect the business results of national transport companies, especially in the context where local companies have just recovered from the Covid-19 pandemic.

Since 100% of domestic shipping routes are currently covered by Vietnamese companies, domestic freight rates have remained low and stable so far, yet to be adjusted by natural gas prices.

Meanwhile, international freight rates have started to increase since late 2020. At the end of March 2022, fuel prices skyrocketed, but most shipping lines had not increased their freight rates in line with fuel prices, with the exception of a few shipping companies which have increased fuel surcharges from March 2022. .

Regarding freight rates for other types of goods, according to the contract signed between the shipowner and the customer, the Vietnam Maritime Administration has not received any feedback from companies on the increase in freight rates. However, in the future, if fuel prices continue to increase or there is no downward trend, ocean freight rates may be affected by fuel prices.

Regarding the direct impact of the conflict on the Vietnam-Ukraine sea route, the Vietnam Maritime Administration said that since the beginning of the war, all seaports in Ukraine have closed and shipping companies have stopped receiving goods to and from Ukraine.

For the Vietnam – Russia route, a number of major shipping companies around the world, especially European shipping companies, have closed shipping routes and stopped receiving goods to and from Russia.

However, some Asian shipping companies still maintain this transportation route but they ask customers to bear all the risk in case of force majeure. Besides the difficulty of freight transportation, international payments for goods imported and exported to Russia are also affected, so many Vietnamese shippers have changed their business plans and reduced the volume of goods exported and imported from Russia.

According to the Vietnam Maritime Administration, many major shipping companies have closed shipping routes to and from Russia, but the demand for importing and exporting goods between Vietnam and Russia is maintained. This may create opportunities for Vietnamese shipowners to increase their market share in the future.

Dau You