Export businesses bear additional costs
Geopolitical tensions in the Middle East and sharp increases in gasoline prices have caused production and transportation costs of many export enterprises to increase, putting great pressure on profits.
As an export enterprise in the wood industry, Mr. Trinh Duc Kien - Deputy Director of Ke Go Co., Ltd. - said that not only transportation costs but also many input costs such as raw materials, insurance, and auxiliary materials have also increased by about 5-7% compared to before due to rising gasoline and oil prices.
According to Mr. Kien, sea freight rates are forecast to continue to increase in the coming time, although shipping lines have not announced specific increases. Usually, freight rates are only determined when goods are about to be exported, so businesses still have to wait for more official announcements from shipping lines in the near future.
The biggest difficulty currently is that businesses often close orders 1-2 months in advance. When signing contracts, input costs do not have large fluctuations, but by the time of delivery, the price of raw materials and transportation costs suddenly increase due to the impact of the war. This makes businesses almost have to bear the incurred costs themselves" - Mr. Kien informed.
Regarding the export market, his business mainly exports goods to Asia, Europe and South America, while the Middle East market accounts for only a small proportion. However, Mr. Kien said that current cost fluctuations still affect all orders, not just those related to the Middle East.
Although the wood industry does not bear major risks in terms of goods quality like agricultural products when transportation is delayed, it has its own difficulties. Many products are produced according to sizes and designs specifically according to customer requirements. Therefore, if orders are interrupted or canceled, businesses will also find it very difficult to find other suitable customers" - Mr. Kien said.
For textile and garment enterprises, Mr. Pham Quang Anh - CEO of DONY Garment Co., Ltd. - said that there is currently no direct notification from shipping lines or transportation partners, but with the current fuel price developments, it is highly likely that there will be adjustments next week. The enterprise has also met and prepared plans to respond, and at the same time sought ways to support customers to minimize price fluctuations.
According to Mr. Pham Quang Anh, for signed orders that are in the production process or preparing for export, businesses are likely to have to accept part of the incurred costs.
For the Middle East market, according to Mr. Pham Quang Anh, businesses are cautiously considering export plans in the coming time.
Check logistics and insurance terms when signing a contract
According to the Ministry of Industry and Trade, it is forecast that consumer goods prices, fuel prices, and world oil prices will fluctuate in an increasing direction in the coming time, causing negative indirect and multi-dimensional impacts on Vietnam's production and import-export activities. For logistics services, increased fuel prices will push up sea and air freight rates, and at the same time affect freight routes for countries in the Gulf region. The Ministry of Industry and Trade recommends that businesses diversify goods supply sources as well as find other markets with similar demand sources to choose alternative options.
Pay special attention when negotiating and signing purchase and sale contracts to pay attention to and pay attention to contracts (or clauses) on logistics, transportation, delivery and insurance to protect businesses from risks and losses in case of incidents, ensure that transportation contracts have clauses on force majeure situations, compensation and cost sharing when goods encounter risks, and at the same time, it is necessary to purchase full insurance for goods to prevent risks and reduce losses in the import market.
