Singapore, Monday, 18 April 2022
Vietnam is proposing the development of a national container shipping operation to counteract the pandemic's substantial increase in freight prices and supply chain interruptions. With the help of private financing, the Vietnam Logistics Business Association recently laid out a plan for the development of intra-Asian shipping operations, which would ultimately expand to worldwide operations.
The group points out that the government has passed numerous resolutions on the problem of increasing Vietnam's shipping fleet, but none have yet to be implemented. Their new strategy aligns with the government's goal of transforming Vietnam into a "developed, high-income country" by 2045. They claimed that having a fleet of containerships would reduce the government's "huge amount of foreign currency" spent on shipping, as well as limit pressure on foreign shipping lines, exposure to freight rate increases and surcharges, and provide a tool for the country's long-term economic security.
Approximately 90% of Vietnam's import and export volume is moved by sea, with 24 million TEU expected to increase by 7% in 2021. However, the country's existing fleet only accounts for roughly 7% of the market, with the remainder being handled by international shipping companies. While Vietnam has ten container shipping companies that own 48 containerships with a combined capacity of 39,500 TEU, 13 of the vessels are over 25 years old, and 15 of the boats have a capacity of 300 to 600 TEU and are only used for domestic operations. Only 14 of the ships have a capacity of 1,000 to 1,800 TEU and are capable of doing intra-Asian voyages.
Wood exports is one of the industries they mention as being particularly adversely hit by the substantial spike in freight prices and capacity restrictions. The United States is Vietnam's largest export market for wood and wood products, accounting for approximately 60% of the country's $14.8 billion in total wood exports last year. Exports to the United States alone increased by 22% to $8.78 billion in 2021, although profitability was cut due to high shipping expenses.
By 2025, the strategy asks for Vietnam to enhance its logistics services. The first phase would last three to five years and cost around $1 billion in ships, with a total cost of around $1.5 billion. It will concentrate on developing intra-Asian services with links to Korea, Japan, China-India, and the Middle East, which account for over 60% of the country's import-export volume.
The first year would necessitate a total of 14 ships, with smaller ones capable of docking immediately at the Hai Phong Port with a capacity of 1,800 to 2,500 TEU. They ask for six similar-sized ships to expand routes to China and Japan in the second year and more Panamax ships with a capacity of 4,000 to 5,500 TEU commencing in the third year. They call for the acquisition of at least 25 ships in the first five years, with a resolve not to buy any ships older than 15 years old, for example.
The second phase of their quest to develop national shipping capabilities is even more ambitious, but it will not begin for at least five years as they focus on Asia. They also acknowledge that "mobilising private resources for investments" as well as coordinated cooperation from manufacturers, shippers, and the government would be necessary.
They want to use post-Panamax and large container ships with a capacity of at least 4,000 TEU and more likely between 6,000 and 11,000 TEU on international routes to the Americas, Europe, and throughout the world. According to the idea, ultra-large vessels with a capacity of 11,000 to 14,000 TEU, or possibly 18,000 TEU, may be required.
Moving through with the strategy, according to the Vietnam Logistics Business Association, is critical to the country's long-term prosperity. They cite Vietnam's experiences during the embargoed and blockaded years of the 1970s. They point out that the state bank spent about $45 million to borrow, buy, and charter a fleet of 19 ships in order to start overseas trade.
(Written and edited by: The Decision Maker Maritime editors in Singapore)