The Port of Ho Chi Minh City has expanded to become the largest facility in southern Vietnam. It now accounts for more than 65% of port throughput in the Ho Chi Minh City area and 42% of throughput in Vietnam as a whole. In 2012, the port handled an estimated 3.22mn twenty-foot equivalent units (TEUs). The port comprises three cargo terminals, as well as depot and customs points, which are situated at different locations within the Mekong Delta area in south-east Vietnam, in an area measuring 60km in circumference.
#CaiMep is Vietnam's largest deep sea facility. The Port of Cai Mep was developed in response to the rapid growth in trade volumes at the Port of Ho Chi Minh, which caused congestion in the area. The Cai Mep facility is located approximately 85km south-east of Ho Chi Minh City, at the mouth of the South China Sea.
In 2012, Vietnam scored 4871 on's liner connectivity index - a considerable improvement on 2004's score of 12.86. Although the port is trailing far behind regional outperformer Singapore, it is well ahead of its neighbours Cambodia and the Philippines. BMI believes that this vast improvement in its connectivity score over seven years demonstrates Vietnam's growing importance in global containerised shipping. The country also now has direct links with major markets in the West. However, it should be noted that Vietnam's place in global container shipping is not yet assured, and that as the industry has struck difficulties Vietnam has been impacted more severely than more established ports of call. This has been demonstrated by the fact that Vietnam's score in 2012 marked a slight decline from 2011's peak of 49.71.
Getting Better Connected Vietnam's Score On The Liner Connectivity Index, 2004-2012
?Vietnamese ports are well placed to take advantage of growing Intra-Asia trade volumes.
?The rapid growth in Vietnam's port volumes has attracted ample international investment in port terminals, giving rise to overcapacity concerns.
?Alleviating economic headwinds in the US and China will support Vietnam's export markets and container ports.
?We caution that Vietnam needs to invest in its freight transport network in its entirety to ensure efficiency at its ports.
The Port of Ho Chi Minh is a vital domestic and regional facility, with the port having rapidly expanded in response to sharp growth in the Vietnamese economy. Container traffic through the port accounts for over 65% of Ho Chi Minh City's market share and more than 40% of the entire country's.
Intra-Asian trade has been growing rapidly, with many shipping firms using this to cushion themselves from the slowly recovering big-money East-West routes. The Port of Ho Chi Minh has been a key part of this and it is not only regional trade for which Vietnam is becoming key. In 2009, Hanjin Shipping became the first carrier to launch a direct service between Vietnam and the US. In September 2010, Hanjin became the first line to launch direct Vietnam-Europe services, followed in October 2010 bymaking the country a port of call on its FAL3 service.
The Port of Cai Mep was developed in response to the rapid growth in trade volumes at the Port of Ho Chi Minh City, which caused congestion in the area. BMI notes that the terminal has a considerable advantage over Ho Chi Minh, in that it offers a draft of 14 metres (m), thereby enabling it to serve post-Panamax container vessels, which cannot call at other Vietnamese ports due to draft and turning restrictions.
The importance of the port's depth was reflected in December 2011, when Cai Mep International Terminal (CMIT) docked its largest ever containership. The 13,830TEULaperouse is the biggest vessel to dock in the Vietnamese port, with its accommodation made possible by the post-Panamax cranes operating at the site.
BMI believes that Cai Mep's positive throughput growth outlook is in large part attributable to APM Terminal (APMT)'s operation of the terminal, as the company has poured in investment and attracted new clients operating on key trade routes. We believe APMT's presence will support continued growth at the port over the medium term (2013-2017) as it continues to improve the port's facilities and attract shipping lines keen to capitalise on Vietnam's positive macroeconomic outlook.
Cai Mep International Terminal (CMIT) at the Port of Ho Chi Minh City (also known as New Saigon Port), which is made up of a collection of terminals lying 50 kilometres (km) away from Vietnam's capital city, is on course to handle nearly 600,000 twenty-foot equivalent units (TEUs) in 2012 - its first full calendar year of operation - according to projections fromsister company APMT. CMIT accepted its first vessel on March 30 2011 and in the following nine months to 2012 handled 186,000TEUs.
On The Up
BMI highlights the substantial investments APMT has made in CMIT since it opened in March 2011 as an important driver of growth. In addition to helping to construct the port, which it did through a joint venture (JV) with Saigon Port and( ), APMT purchased two laden reach stackers, an empty reach stacker, two empty container handlers and a 25-tonne forklift - all of which were delivered by in 2011. Weak infrastructure is one of the main factors holding back Vietnam's shipping sector - the country ranks 111th out of 145 countries on the 's Global Competitiveness Report on the Quality of Port Infrastructure. As such, APMT's commitment to improving CMIT's facilities is an important step both for the terminal and the country's shipping sector as a whole.
Investment in the port has allowed Cai Mep to attract a client base of some of the major players in the box shipping sector. While a foregone conclusion, given APMT's close connection with the company,began pulling into the port in August 2011, boosting throughput as expected. More significantly, CMIT has added and the Grand Alliance - comprising shipping lines , (NYK), and (CL) - to its client list. These lines not only provide positive prospects for the port given their direct impact on throughput volumes, but also because their presence signals the industry's confidence in the terminal's growth outlook and growing role in the region.
An important aspect of the addition of these lines to the terminal is that they have exposed CMIT to the two largest maritime trade routes: Asia-Europe and Asia-America. Maersk has added the port to its Transpacific string from Asia to North America, whileand the Grand Alliance have placed it on their Asia-Europe routes, marking the first time Vietnam had been directly connected on either of these trade routes.
We highlight that Vietnam previously only played a role as a feeder port, relying on the transhipment of containers through one of Asia's larger, better-equipped ports such as Singapore. Exposure to these routes is in large part attributable to the port's ability to handle ultra-large container ships, which are becoming the standard for shipping containers on Asia-Europe trade routes. This was demonstrated in December 2011, when's 13,820TEU Laperouse docked at the terminal. We believe CMIT's proven capacity for handling these vessels marks an important step for the terminal and will be a key driver of growth over the medium term, though in the near term there are significant hurdles to be crossed.
Overcapacity Remains A Threat
The rapid growth in Vietnam's port volumes has attracted ample international investment in port terminals. However, concerns are being raised about the possibility of overcapacity in the country's container port sector. This a particular concern for operators at the Port of Cai Mep. In 2006, international terminal operators secured stakes in nine terminals at the port after the government invited foreign investment, believing that rising throughput volumes would be quickly soaked up by increasing capacity. Five of the nine planned terminals are in operation in the Cai Mep area, but are working well below capacity, with as little as 20% of capacity at CMIT being utilised. With additional new facilities due to come online, BMI believes this is a considerable cause for concern. Further, as container shipping lines look to consolidate their services Vietnam, as a relatively new addition, is at risk of being struck from the ports of call.
The lack of container traffic seen at the beginning of 2012 also poses problems for ports in the province of Ba Ria-Vung Tau. Ports in the region have a total container handling capacity of up to 8mn TEUs; however, the actual demand only comes to around 5mn TEUs. Ports in the Cai Mep-Thi Vai region of Ba Ria-Vung Tau have been failing to attract a significant number of vessels, despite a total investment of over US$7bn by the end of 2011, according to reports. The region contains several modern container ports and is set to open several more facilities in 2012 and 2013. Industry analysts attributed the failure to a lack of infrastructure, which has caused capacity to remain largely underutilised. Only 62.5% of overall port capacity in the province of Ba Ria-Vung Tau is in use.
It is in this atmosphere of concern over having grown too much too soon that the construction of Van Phong International Transshipment Port has been halted at the behest of the. The decision to shelve the planned port - originally proposed to be completed by 2020 - was undertaken by the Vietnamese Deputy Prime Minister, Hoang Trung Hai and was made public in September 2012.
The estimated cost of the project was set to be US$3.6bn and the construction work would have included 37 wharves at length of 12.5km. The initial stage of the project began in October 2009 and was pencilled in to be completed by the end of 2012; however, financial mismanagement meant that the project fell way behind schedule., the project's investor, was urged to alter its plans by the Vietnamese government and so the company came up with the idea of expanding the port in order to handle container vessels up to 12,000TEUs.
The deputy prime minister asked the Transport Ministry to look into the feasibility of raising domestic and foreign investment to fund the project, which is located in Hon Gom peninsula. The Van Phong port has become the target for criticism, as Vietnam's attractiveness for potential investors weakens. The Van Phong site was described as too far from any major manufacturing companies, and the state's role in neglecting better infrastructure at strategic locations is being highlighted.
Global Headwinds Alleviating In 2013
We forecast Vietnam's real GDP growth figure to climb to 7.0% in 2013 following an expansion of 5.0% in 2012; this expansion in 2012 was the slowest since 1999, and reflected the headwinds buffeting Vietnam's key trade partners, namely the US and China. However, the outlook for 2013 is looking more sanguine, resulting in our growth rate of 7.0%. This is in keeping with our more buoyant general outlook for the global economy which has seen us make a significant upwards revision to our China growth forecast for the year from 7.1% to 7.5%, and bump the US's growth projection up to 2.3% following the avoidance of the fiscal cliff.
However, over the longer term, imports will be boosted by Vietnam's young population, as younger populations are generally more supportive of private consumption. The country has a population of 90.7mn, according to estimates for 2013 by BMI, 60% of which is under 35. We forecast that the population will be 94.1mn by 2017, with 57% under 35, and will rise to 97.7mn by 2022.
Road And Rail Links Need Investment
The Vietnamese government plans to deepen the Port of Ho Chi Minh City's draught, allowing larger vessels to access the facility. BMI notes that these works are badly needed, as we are seeing a growing trend of lines ordering larger container vessels. Recognising the need to cater for bigger vessels, Vietnam's prime minister has directed the country's ministry of transport and its Maritime Administration to focus on developing deep water ports. A channel depth of about 14m is required for non-tide restricted access for vessels with capacity of up to 8,000TEUs.
BMI notes that while Vietnam's port sector has received plenty of investment, due to growing Intra-Asia trade volumes, the freight transport networks that link the ports with production and consumer centres are badly in need of investment. Growth in box throughput at the nation's ports has far outpaced investment in its freight transport network. In 2010 (latest available data), total container throughput at the country's ports reached 5.98mn TEUs, up 550% from the 919,264TEUs handled in 1999.
With a rating of 123 out of 142 in the's 2011-2012 Global Competitiveness Report, Vietnam's road infrastructure is the regional underperformer, trailing well behind regional leaders Singapore and Hong Kong. The country's rail infrastructure fares slightly better, with a score of 71 out of 123, placing it just ahead of the regional underperformer the Philippines. BMI believes there must be more private and state investment in developing these links if the country's ports are to take full advantage of increasing trade volumes. - --Business Monitor International.---