Over the period 1999 to 2009 cargo volumes at Vietnam’s ports surged more than four times, while the number of calls by vessels increased about 215%, according to the Vietnam Seaports Association. Last year, the complex close to Ho Chi Minh City ranked 29th among the Top 100 container ports in 2009 behind regional rivals such as Singapore (see our Top 100 Container Ports 2010 Supplement).
Vietnam is pouring billions of dollars into building ports for the world’s largest container ships in a drive to draw export industries from China. “The investment may propel the port complex near Ho Chi Minh City into the ranks of the world’s top 15 ports within a decade,” says Malcolm Gregory, Chief Commercial Officer at the USD270 million Cai Mep International Terminal Co. The port-investment target is part of Prime Minister Nguyen Tan Dung’s plan to boost Vietnam’s economic growth. The premier is also striving to tame inflation, which climbed to a two-year high of 12.31% in February. The State Bank of Vietnam raised borrowing costs for the third time in as many weeks on March 8, increasing its refinancing and discount rates to 12% each, matching the level of the repurchase rate. The monetary authority devalued the dong for the fourth time in 15 months on February 11 as it strives to narrow the nation’s trade deficit. Officials have also clamped down on the use of gold and dollars as they seek to stabilise the currency and steady the economy. The central bank devalued the dong by about 7 percent last month, the most since at least 1993. Dung’s goal is to invest as much as VND440 trillion this decade to increase deep-water port capacity for larger vessels, including container ships and oil tankers. Under the plan the volume of goods handled will expand to between 900 million and 1.1 billion tonnes by 2020 from 172.1 million in 2009.
Export
Major companies from a range of business sectors are shifting production to Vietnam, lured by cheaper labour compared with China and deeper ports for container vessels sailing directly to the US, Europe and Asia. “Many manufacturing bases are being moved to Vietnam,” observes Jay Ryu, a Hong Kong-based analyst at Mirae Asset Securities Co. “With the yuan appreciating and costs, especially labor expenses, on the rise, it’s becoming less attractive to do business in China and many are moving out.” The government aims to boost shipping volume more than 400 percent this decade in the quest for economic growth. Exports make up about 75 percent of Vietnam’s gross domestic product. “Vietnam is so heavily dependent on external demand that getting the entire system to work, not just ports, but roads and railways too, and making customs work faster, is a big part of the story,” says Jonathan Pincus, the dean of the Harvard Kennedy School’s Fulbright Economics Teaching Program in Ho Chi Minh City. Cha Kyung Jin, the Seoul-based head of investment at Golden Bridge Asset Management Company points to the untapped potential in a nation that last year exported less than half as much as Thailand, but whose population is about a quarter smaller. “We want to increase our investment in Vietnamese companies, including Vietnam Container Shipping,” he said. “Their port industry offers a lot of potential as their international trade is growing.” Jin also added that stocks in Vietnam Container Shipping Joint-Stock Co are worth buying. Another shipping enterprise, General Forwarding & Agency Joint-Stock Co, is a “good buy” after sliding since 2009, said Ho Chi Minh City- based Nguyen Hoai Nam, an analyst at Kim Eng Vietnam Securities.
“You’ve got all these wonderful exports, but you can’t get them to the market,” explains David Creighton, Chief Executive Officer of Cordiant Capital Inc in Montreal. It invested USD27 million in the Cai Lan International Container Terminal, LLC in the northern province of Quang Ninh. “The new ports will allow much larger ships to get access and will earn fees in US dollars, meaning devaluations of the Vietnamese currency won’t hit their balance sheets,” he said.
Future
It is therefore no surprise that between 2011 and 2013 four new container terminals in the Ho Chi Minh City port area are schedule to open. “The increasing need for deep?water facilities will be a significant factor in utilisation forecasts for Southern Vietnam container traffic in the years ahead,” said Gregory. “Growth in trade and corresponding container traffic at Southern Vietnam’s gateway Ho Chi Minh City port complex is jumping, and in response there has been tremendous activity in terminal investment.” Cai Mep International Terminal gives access to vessels with a draught of as much as 16m and will have an annual capacity of 1.1 million TEU. “Sufficient access channel depth will be one of the primary determining factors of which facilities cater to which segments of Vietnam’s container trade,” according to Gregory.
Water depth of 14m is required for non?tide restricted access for vessels up to 8,000 TEU-capacity, which are expected to be entering the Vietnam trade. A lack of modern road and rail infrastructure keep much of Vietnam’s container transportation inland by barge service, which is projected to account for almost 50% of deep water terminal traffic in 2010, adding to capacity requirements. “Long?haul Transpacific and Europe trades, representing nearly 30% of Ho Chi Minh City port traffic, will continue to migrate to the new deep?water terminals as newer, larger vessels come into service, so there is a very real need for capacity and capability expansion, but new project completion dates need to be aligned with expected market need,” says Gregory. Container volume at the Ho Chi Minh City and Cai Mep ports, which handles approximately two out of every three TEU in Vietnam, surged by 16% in the first half of 2010 leading to a full year 2010 estimated throughput of close to 4.2 million TEU.