Wood exporters suffer as shipping fees eat profits

The average price of shipping a container from Vietnam to the U.S. East Coast has surged 3.4 times to $16,333 since January last year, according to the Vietnam Logistics Association (VLA).

A VLA report also said prices to the West Coast have surged by the same ratio to $13,667.

Worse still, there are times when prices are above $20,000, nearly equal the value of the container’s contents.

"There have been times when a container of wood is valued at $25,000, but transportation prices to the East Coast was almost that much," Vo Thi Phuong Lan, head of transport and delivery at VLA, said at a forum Thursday.

The U.S. is Vietnam’s biggest export market for wood and wooden products, accounting for nearly 60 percent of Vietnam’s total wood exports value of $14.8 billion last year.

Exports to the U.S. alone rose 22 percent to $8.78 billion last year.

After two years of Covid-19, Vietnamese wood exporters are on the recovery track, with many companies having secured contracts until the end of the third quarter, according to the Handicraft and Wood Industry Association of Ho Chi Minh City (HAWA).

The wood export target of $16.5 billion this year is a feasible one, it added.

But high logistics costs are hitting exporters hard.

Tracy Tran, a representative of Mitchell Gold and Bob Williams, a buyer for American furniture retail chains, said that many lower-priced containers ($9,000-10,000) are used up due to high demand, and therefore exporters have to use the premium containers priced at over $20,000.

Another challenge is rising fuel prices, which account for 40 percent of domestic transportation costs.

Oil prices surged 52 percent year-on-year in the first quarter, which was "beyond the estimation of both logistics and manufacturing firms," said Lan.

Some logistics industry insiders have proposed that wood exporters use ships instead of trucks to carry their containers to an international port.

A company in the southern province of Binh Duong, for example, can ship its container to the Cai Mep Terminal in Ba Ria–Vung Tau Province, which would cost 20-30 percent less than using roads.

Other shipping routes to Cai Mep could also cut costs by 10 percent, she added.

Another factor that could reduce exporters’ profit this year that wood prices have risen by 28 percent to 40 percent.

"With the Russia-Ukraine tensions showing no sign of easing and container shortages still occurring, material prices are likely to keep rising," said Vo Quoc Loi, a member of the leadership board at HAWA.