Apparel brands sourcing in Vietnam now have another outlet to ship products out of the country as ocean freight rates keep increasing and container capacity continues to be constrained.
Vietnam Railways (VNR) opened a new direct rail freight in the nation’s capital, Hanoi, that departed for Liège, Belgium for the first time this week. The freight car carried 23 forty-foot equivalent units (FEUs) of garments, textiles and leather shoes out of Hanoi’s Yen Vien Railway Station.
During its journey, the train will stop at Zhengzhou, China and connect to the Asia-Europe train route to reach its destination. The length of the route is expected to be 25 to 27 days.
When the train stops at Liège, the containers will be unloaded and sent by trucks to their final destination, the Port of Rotterdam in Netherlands. Currently, VNR is providing freight train services between Vietnam and China, with additional routes to Russia, Europe, Southeast Asia and Central Asia.
The expansion of the freight system comes at a time when Vietnam’s ports, like those in many areas worldwide, are congested due to high traffic and demand. But Vietnam’s shipping yards are now also dealing with a serious Covid-19 outbreak, with the Vietnamese government directing all non-essential businesses to close on Friday, July 16 as the country’s southern provinces seek to contain the spread of the virus.
Two days later, Ho Chi Minh City and 19 other cities and provinces extended lockdowns.
Saigon Newport (SNP), which operates inner-city river terminal Tan Cang Cat Lai in Ho Chi Minh City, said in a statement that the outbreak had “heavily disrupted” manufacturing operations.
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“[This] has created a negative impact on Tan Cang Cat Lai terminal’s operations and there is high risk of backlogs due to slow pickup or release of import containers,” SNP said.
The pandemic has extended to the country’s factory system, with suppliers for both Nike and Adidas shuttering factory production earlier this month, while Crocs expects temporary factory closures in Vietnam in its third quarter. A report from business publication Nikkei Asia even said that some Vietnamese factories have set up Covid-19 “bubbles” that require staff to sleep over during the lockdowns so they won’t shut down.
With these bottlenecks hampering the manufacturing and flow of goods out of Vietnam, an alternative transportation route for already finished goods would be welcomed by brands, especially if they have operations in Europe.
VNR, the state-owned operator of the country’s railroad system, said the Hanoi-to-Liège transport is the first container freight train operated by member unit Rail Transport and Trade Joint Stock Company (Ratraco) in conjunction with foreign logistics companies to oversee shipments to the target destination.
Currently, Ratraco and its European partner plan to organize eight trips per month departing from Vietnam. A second train will depart from Yen Vien station on July 27 carrying electronic products, while a third departure is scheduled for August 3.
Nguyen Hoang Thanh, deputy director-general of Ratraco, told the Vietnam News Agency (VNA) that a successful run of the train from Vietnam to Belgium will open up rail transport routes going deeper into Europe, in addition to the existing ones to Germany and Poland.
Legislators in Vietnam also seek to increase the nation’s manufacturing capacity and spur economic growth, so government intervention appears to be the inevitable route toward building more infrastructure.
Prior to the recent outbreak starting in late April, Vietnam had shown that its manufacturing operations have plenty to build on. Exports in the first half of 2021 rose 28.4 percent from a year earlier to $157.63 billion, while industrial production increased 9.3 percent, according to the government’s General Statistics Office.
But now Vietnam’s Transport Ministry is calling for $10.4 billion to be spent on upgrading its national rail network through 2030, offering the prospect of linking Europe with other key hubs including Ho Chi Minh City.
The Ministry has submitted a draft plan on railway development up to 2030 to Vietnam’s Prime Minister for approval. It aims to raise the sector’s global market share to 0.27 percent in cargo transportation and 4.4 percent in passenger transportation by 2030. The volume of cargo will reach 11.8 million metric tons by 2030, up 2.3X over 2019’s figure.
To achieve this goal, the national railway network would be extended to 16 routes. The number includes seven existing routes and nine new lines, with the existing routes all being upgraded to meet domestic transport demand.
The $10.4 billion proposal is part of a larger transport infrastructure plan from the Ministry’s Transport Development and Strategy Institute, which could cost anywhere between $43 billion and $65 billion through 2030.
Under the larger plan, Vietnam will build thousands of kilometers of new expressways, high-speed rail routes, deepwater ports and new international airports. The government hopes Vietnam can achieve a cargo transportation capacity of 4.4 billion metric tons per year.