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Vietnam Shipping Report Q2 2011
Business Monitor International, Feb 2011, Pages: 99
Business Monitor International's Vietnam Shipping Report provides industry professionals and strategists, corporate analysts, shipping associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Vietnam's shipping industry.
Demands on Vietnam's ports have increased in line with its development as a major export centre over the past few years. As a result, foreign interest in Vietnam's ports is growing; international investors realise the growth potential in a market where trade volumes are expanding beyond the capabilities of a logistics sector stunted by years of underinvestment. There are plans to open four new container terminals in the Ho Chi Minh port area alone between 2011 and 2013. Our forecasts reflect the strong growth potential in Vietnam's shipping sector.
Headline Industry Data
2011 port of Ho Chi Minh tonnage throughput forecast +7.45% following projected growth of 6.22% in 2010.
2011 port of Da Nang tonnage throughput forecast +2.76% following projected growth of 2.31%in 2010.
2011 port of Ho Chi Minh TEU throughput forecast +4.35% following projected growth of 13.89% in 2010
2011 port of Da Nang TEU throughput forecast +7.09% following projected growth of 6.15% in 2010
2011 total trade forecast +11.3% Key Industry Trends
International Lines Increase Calls as Vietnam Becomes Export Centre -- BMI continues to single out Vietnam as an outperformer in the sector as its role grows in the global box shipping sector. The country is set to benefit from direct links with the US and Europe, and in BMI's opinion will become a focal point for many lines' expansion into intra-Asia trade routes.
In November 2010, CMA CGM became the latest global shipping line to add Vietnam as a direct port of call to its Asia-Europe services. The French carrier added the Vietnamese port of Cai Mep to its French- Asia Line 3 (FAL3). The 70-day service offers calls at the Asian ports of Qingdao, Ningbo, Chiwan, Nansha, Yantian and Kelang, and will link Vietnam with the major European ports of Malta, Le Havre, Dunkirk, Zeebrugge, Hamburg, Rotterdam and Southampton.
Terminal Operators Race To Cash In On Vietnam -- BMI has noted a trend of international companies developing facilities at Vietnamese ports, indicating growing international interest in Vietnam, as it becomes a significant export nation. Plans by SITC International Holdings Company (SITC) to build and operate a logistics park in Haiphong's Dihn Vu Port is a further reflection of this view.
The agreement announced in November 2010 will see SITC International, through its wholly owned subsidiary SITC Shipping Asia PTE, establish a joint venture, SITC-Dinh Logistics Co with Dinh Vu Port Development and Investment Joint Stock Company in Haiphong. The joint venture company will carry out logistics between Vietnam and neighbouring Asian countries, covering door-to-door services that include shipping agency, multimodal transport, trucking, container freight stationing, warehousing, forwarding, container repair and customer declaration services. SITC International plans to replicate its existing Qingdao Logistics Park at Dihn Vu, creating a 'customer-oriented integrated logistics park' near port, highway and rail facilities as well as enhancing sea, land and airfreight services and distribution and delivery.
Infrastructure Failings Jeopardise Vietnam Ports Boom -- Despite these positive developments, BMI cautions that further investment is needed to ensure that Vietnamese ports can handle an expected increase in traffic. As Vietnam's role in the box shipping sector increases, more pressure will be placed on the country's port infrastructure. Vietnam is attracting investment in its port sector with four new container terminals planned to be launched between 2011 and 2013 in the Ho Chi Minh port area alone. However, BMI fears that this will not be enough, and that although port-side investment is flooding in, money is also needed further up the logistics supply chain for the country's road and rail sectors. PPPs Could Be Way Forward For Vietnam's Underfunded Port Sector -- BMI believes that a possible commitment by the Vietnamese government to use public-private partnerships (PPPs) to develop the country's infrastructure is good news for Vietnam's port sector.
Vietnam's Ministry of Planning and Investment plans to submit draft regulations on PPP-infrastructure projects to the government. Currently, there are 23 proposed PPP projects relating to seaport development and services, involving a total investment of US$3.3bn. Twelve of the proposed projects involve seaport construction. PPPs could make Vietnam's master plan for port development, which calls for total cargo volume throughput to increase to 500-600mn tonnes a year by 2015 and 800-1,100mn tonnes by 2020, more achievable.
Risks To Outlook The possibility of establishing PPPs to develop Vietnam's ports gives upside risks to our forecasts. PPPs would close the gap in funding in the country's port sector, as the state alone is unlikely to be able to finance the level of investment needed. As well as being beneficial to the state, BMI believes that PPPs should prove attractive to foreign investors. Foreign interest in the Vietnamese port sector is growing; the country's macroeconomic outlook is good and international investors realise the growth potential in a market where trade volumes are expanding beyond the capabilities of a logistics sector stunted by years of underinvestment.
The main downside risk to outlook for Vietnam is the possibility that the country will not improve its port sector fast enough to keep up with demand for exports. Poor infrastructure and a lack of investment in dredging mean that larger ships are unable to call at many Vietnamese ports. With container ships constantly growing in size this will make Vietnam's ports less competitive in the future. A lack of modern road and rail infrastructure means that much of Vietnam's inland container transportation is carried out by barge service, which is projected to account for almost half of the country's deepwater terminal traffic in 2010, adding to capacity requirements.
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