Vietnam-Russia New sea and railway commerce route

For the past five years, Vietnamese exporters and importers have relied heavily on rail shipping to Russia to satisfy their rising demand, particularly for infant meals, drinks, footwear, and textiles.

On September 6, Russia inaugurated a new connection between the sea and railroad channels for transporting products to and from Vietnam. The link signifies the expanding logistics and bilateral trade between the two nations, enabling the direct transport of commodities from Vietnam to Western Russia and vice versa.

The Vietnam Briefing examines the expanding trade between the two nations, which is assisted by the marine freight and rail links.

Vietnam and Russia have maintained a well-established diplomatic connection over the past seven decades. In economic, social, and political dimensions, both parties are dependable allies, and Russia is an important export market for Vietnam.

Still positive bilateral trade between Vietnam and Russia

Despite the uncertainty caused by the Russia-Ukraine war, the bilateral commerce between Vietnam and Russia shown good signals as of January 2022. Vietnam’s exports to Russia were valued at $391 million, while its imports were valued at just 160 million, resulting in a trade surplus of $231 million. Vietnam’s imports from Russia increased by 80.2% year-on-year, while exports to Russia increased by 5.32 % year-on-year.

According to the Observatory, Vietnam’s leading exports to Russia are cellphones (US$125 million), electronic gadgets (microphones and headphones) (US$20,9 million), coffee (US$16,3 million), textile footwear (US$14.4 million), and industrial printers (US$13.9 million).

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Coal (US$52,8 million), iron (US$20,3 million), chemical fertilizers (US$19.7 million), pig meat (US$8.61million), and chemical compounds (US$6.91million) are Russia’s primary exports to Vietnam.

Since the Vietnam-EAEU FTA went into effect in 2016, the bulk of tariffs on Vietnamese exports to Russia have been eliminated.

Depending on the item, there are three choices for transporting goods between the two countries: air freight (more expensive but faster), railway transit (cost-effective and timely), and ocean transport (cheapest option but takes longer).

The recent connection between the Vietnam-Vladivostok sea freight route and the Russia-Vladivostok-Moscow railway line ushers in a new era of logistics, underpinning exports and imports between the two nations. With the assistance of a new link, Vietnam Briefing investigates new potential for Vietnamese enterprises when using marine and railway networks.

A reduction in transit times between Vietnam and Russia

FESCO (Far Eastern Shipping Company), Russia’s largest private transport and logistics company, announced its deeper penetration into the Vietnam market in May 2022 with the FESCO Vietnam Direct Line (FVDL), which operates on the Vladivostok (Russia)-Hai Phong (Vietnam)-Ho Chi Minh (Vietnam)-Ningbo (China)-Vladivostok (Russia) route.

This container shipping route has enabled direct trade between Russia and Vietnam, and vice versa. The expected time for a container ship to go from Vietnam to Vladivostok is 9 to 12 days, compared to two to three months in 2021.

The regular marine route provided by FESCO enables commodities to go straight from the Vietnamese ports of Hai Phong or Ho Chi Minh City to Vladivostok, bypassing the time-consuming reloading procedure at transshipment ports. In reality, reloading at transshipment ports might add two to three weeks to the delivery period.

The FVDL also mitigated the escalating prices of freight; in 2021, marine freight rates increased by 60 percent, with a 40-foot container costing $10,000 in September of that year. When the route’s operation becomes more solid in the next years, it is anticipated that the same container will cost an additional $200-$300 less.

According to FESCO, the FVDL has successfully moved an estimated 5,000 containers in four months as of September and is already planning to increase capacity.

The Hanoi-Moscow rail freight: economical freight transit

The Russia-Vietnam-Russia transport corridor has been run by RZD Logistics (a famous Russian Railway logistics firm) in conjunction with Vietnam’s Ratraco (a logistics and commerce organization) since 2018.

For the past five years, Vietnamese exporters and importers have relied heavily on rail shipping to Russia to satisfy their rising demand, particularly for infant meals, drinks, footwear, and textiles. Due to reduced prices and faster delivery times, rail freight has been regarded the superior option to ocean freight. Nonetheless, after the implementation of the FVDL, as previously stated, the benefit of rail freight’s faster delivery time is no longer totally valid. A cargo between Hanoi and Moskva via RZD might take up to 24 days.

As of July 2022, the volume of rail freight shipments to Russia was already four-and-a-half times that of the same period in 2021. Since 2021, the success of rail transport may be linked to the decreased freight, in contrast to the rising maritime freight. In addition, streamlined procedures for submitting rail freight orders have encouraged more Vietnamese businesses to choose this strategy.

Russia-Vietnam rail freight was further bolstered as early as 2022, when Russia’s largest railway logistics business, TransContainer, launched their rail freight operations in Vietnam, recognizing the market’s enormous potential.

Typically, TransContainer trains depart from Hanoi, Vietnam, cross China, conduct transshipment at the Zabaikalsk station (on the Russia-China border), and then arrive at the Elektrougli station in Moscow, Russia. The cargo takes around 35 days, and TransContainer anticipates operating at least two container trains every month on this route.

The connection between the sea route Vietnam-Vladivostok and the railway line Vladivostok-Moscow.

The link between the FVDL sea route and the Vladivostok-Moscow railway line was formally approved by FESCO and RZD Logistics on September 6 in order to encourage a more direct and efficient flow of products.

The linked routes utilize a digital security system that enables businesses to actively follow their goods in real time and do customs clearance at the Moskva station. The connection will cut delivery times and streamline administrative procedures for Vietnamese exporters who desire to efficiently transfer goods to western Russia.

As FESCO plans to deploy more regular container ships on its marine route to increase capacity, and as the rail freight between the Russian towns of Vladivostok and Moskva is set to be renovated, commerce between Vietnamese companies and their Russian counterparts is likely to increase.

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