Logistics cooperation crucial for exports to Europe

At the Meeting of Vietnamese Trade Counselors in Europe held in Italy on July 18-19, 2024, Nguyen Hong Thanh, Head of the Vietnam Trade Office Branch in the Far East region, delivered a presentation on the promotion of logistics cooperation and solutions for transportation of goods to European markets in the current context.

Currently, the transportation of goods from Vietnam to European markets primarily utilizes air, rail, and sea routes, with sea transport holding the largest share due to its cost advantages. However, maritime logistics have been affected by the ongoing Crimea situation since 2014, the Suez Canal incident in 2021, pandemic-related restrictions starting in October 2023, and attacks by Houthi forces in the Red Sea.

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Sea freight rates between Asia and Europe are currently very high, with extended transit times due to many shipping companies having to reroute around the Cape of Good Hope in South Africa, adding approximately 15 days to the journey. International logistics companies are now considering alternative transportation routes and multimodal transport solutions to maintain efficient cargo flow between Asia and Europe while managing costs and transit times for exporters and importers.

In 2021, the Railway Transport and Trade Joint Stock Company (Ratraco) connected with Chinese and Russian railways to operate two intermodal cargo rail routes from Gia Lam Station: the first route runs through China, Kazakhstan and Russia to Europe, and the second route through China into Russia at Zabaikal in the Far East, then western Russia and Europe. Both routes run through Kaluga or Moscow before connecting to EU markets such as Poland, Germany, France, Belgium, and others. These intermodal rail routes have received substantial support from the Vietnamese Trade Office in Russia. Ratraco is considering increasing the frequency and volume of export goods transported by containers via these rail routes.

In 2022, due to the Russia-Ukraine conflict, international shipping companies canceled their routes to Russian seaports. However, thanks to efforts from various parties, the Russian shipping company Fesco resumed the direct sea route from Vladivostok to Vietnamese ports. To date, after two years of operation, Fesco has transported over 300,000 TEUs of goods between Vietnam and Russia.

Following Fesco, the Russian shipping company Trasit LLC is also operating a direct sea route from Vietnam to the port of Vladivostok. According to Russian Customs, in 2023, over 60 percent of Vietnam’s exports to Russia was transported through the Far East by rail and sea routes.

Nguyen Hong Thanh, Head of the Vietnam Trade Office Branch in the Far East region

To maintain and develop logistics operations from Vietnam to European markets, the Vietnam Trade Office Branch in the Far East region recommends:

- To diversify and multimodalize transportation activities to mitigate risks associated with relying on a single type or fixed route for transporting goods from Vietnam to Europe.

- To establish a continuous information channel to provide the business community with regular warnings about risks, freight rate fluctuations, and guidance on appropriate transport modes and routes in Asia-Europe freight transport through media, logistics associations, and industry associations

For the Russian market, it is necessary to strengthen support for resuming more flights between cities. Utilizing cargo flights to transport fast-moving goods such as fresh fruits, clothing, and new mobile device models is crucial.

The Vietnamese Trade Office in the Far East hopes that trade offices will advise the Government to study the impacts and opportunities for global logistics, including for Vietnam, that the Northern Sea Route will bring in the next 5-10 years. This will enable Vietnam, as the first Southeast Asian country, to participate in this new critical global transportation route.