Vietnam Freight Transport Report Q1 2012
Includes 3 FREE quarterly updates
Vietnam's freight transport sector is set to continue its steady growth trajectory over the medium term with the spectre of overcapacity a looming threat on the horizon. The required pace of expansion continues to pose a problem due to the state of infrastructure in the country and we caution that investment is needed if Vietnam is to fulfil its potential.
In terms of year-on-year (y-o-y) tonnage growth, the Port of Ho Chi Minh City is set to lead the way in 2012, with a healthy increase of 7.96% forecast, while air, road and rail are all expected to perform solidly in 2012 and to 2016.
There are some dark clouds hovering on the horizon, however. BMI believes that the recent rise in Vietnamese sovereign credit default swaps suggests that investors are pricing in growing risks of a sovereign debt default. We believe that deteriorating global economic headwinds and rising debt servicing costs are among the key reasons behind growing pessimism over the government's credit worthiness. Although the latest rate hike could put further downward pressure on growth and raise debt servicing costs in the near term, we are positive that higher interest rates will help attract more foreign capital into the country.
Headline Industry Data
Ho Chi Minh Faces Overcapacity And Infrastructure Concerns Vietnam's port sector has seemingly become a victim of its own success as rapid growth has seen the country's underdeveloped port sector struggle to keep pace with increasing volumes of trade. BMI believes this pressure could ease somewhat in 2012 as global economic headwinds continue to act as a dampener on external demand for Vietnamese exports.
Upgrade For Mekong Delta Ports Crucial To Economic Growth
The Vietnamese government announced major plans in September 2011 to boost the combined port capacity in the Mekong Delta provinces from 15.7mn tonnes in 2010 to 28mn tonnes in 2020. BMI welcomes such an investment, as we have long held the view that Vietnam's port sector requires considerable investment if it is to handle a projected increase in trade, as mentioned above.
Kerry Logistics Invests In Vietnam
Hong Kong-based Kerry Logistics announced in September 2011 that it is set to open a new logistics centre in Hanoi, Vietnam. The centre will be located on the road to the main port of Haiphong, providing the company with excellent access to one of Vietnam's major logistics hubs. The 10,000 square metre facility is expected to complete the company's plan to offer a high level of coverage for all the industrial centres in Vietnam, reports Eye for Transport.
Key Risks To Outlook
On the upside, Vietnamese state-owned port operator Vietnam National Shipping Lines (Vinalines) signed a contract in October 2011 with Japan-based Molyto (a joint venture between three Japanese companies: Mitsui O.S.K. Lines, Nippon Yusen Kabushiki Kaisha and Itochu) to construct two berths at the Lach Hyuen port in Northern Vietnam. BMI notes that it is mainly Japanese companies that are developing Vietnam's northern deep sea ports.
We have long highlighted the importance of foreign investment in Vietnam's port infrastructure due to its implications for the country's economic growth. While the southern port of Ho Chi Minh is facing the prospect of overcapacity, there remains a significant demand for deep-water port capacity in the northern parts of Vietnam.
This is because the country is looking to develop deep-water ports in key regions, allowing goods to be shipped directly to their destination markets instead of transshipping through Singapore, Malaysia and South Korea. The Lach Hyuen port is located just 100km east of Vietnam's capital Hanoi, and is expected to eventually replace the nearby Hai Phong port - currently the largest port in the northern region of Vietnam. The Hai Phong port is reaching capacity and does not have adequate infrastructure to handle some of the larger container ships. The Lach Hyuen port expansion will be implemented to address this deficit.
On the other hand, downside risks exist in Vietnam's port sector, due to the rapid growth in the country's port volumes and subsequent concerns that have been raised over the possibility of overcapacity at the Port of Ho Chi Minh. Additionally, there is some sense of déjà vu in the global infrastructure space. Valuations are falling, credit is drying up, demand risk is rising and investors are avoiding risk; factors seem to be aligning for a repeat of the fall of 2009. While we see several red flags in the infrastructure finance market, we do not believe that the market will come to a standstill.
Vietnam's freight transport sector is set to continue its steady growth trajectory over the medium term with the spectre of overcapacity a looming threat on the horizon. The required pace of expansion continues to pose a problem due to the state of infrastructure in the country and we caution that investment is needed if Vietnam is to fulfil its potential.
In terms of year-on-year (y-o-y) tonnage growth, the Port of Ho Chi Minh City is set to lead the way in 2012, with a healthy increase of 7.96% forecast, while air, road and rail are all expected to perform solidly in 2012 and to 2016.
There are some dark clouds hovering on the horizon, however. BMI believes that the recent rise in Vietnamese sovereign credit default swaps suggests that investors are pricing in growing risks of a sovereign debt default. We believe that deteriorating global economic headwinds and rising debt servicing costs are among the key reasons behind growing pessimism over the government's credit worthiness. Although the latest rate hike could put further downward pressure on growth and raise debt servicing costs in the near term, we are positive that higher interest rates will help attract more foreign capital into the country.
Headline Industry Data
- 2012 rail freight tonnage is set to increase by 5.29% to 8.62mn tonnes.
- 2012 air freight tonnage is forecast to rise by 5.72% to 206,960 tonnes.
- Tonnage handled at the Port of Ho Chi Minh City in 2012 is forecast to grow 7.96% in 2012, whereas tonnage handled at the Port of Da Nang is forecast to increase 3.08%.
- 2012 road freight tonnage is forecast to grow by 6.97%.
- 2012 total trade is forecast to rise by 7.25%
Ho Chi Minh Faces Overcapacity And Infrastructure Concerns Vietnam's port sector has seemingly become a victim of its own success as rapid growth has seen the country's underdeveloped port sector struggle to keep pace with increasing volumes of trade. BMI believes this pressure could ease somewhat in 2012 as global economic headwinds continue to act as a dampener on external demand for Vietnamese exports.
Upgrade For Mekong Delta Ports Crucial To Economic Growth
The Vietnamese government announced major plans in September 2011 to boost the combined port capacity in the Mekong Delta provinces from 15.7mn tonnes in 2010 to 28mn tonnes in 2020. BMI welcomes such an investment, as we have long held the view that Vietnam's port sector requires considerable investment if it is to handle a projected increase in trade, as mentioned above.
Kerry Logistics Invests In Vietnam
Hong Kong-based Kerry Logistics announced in September 2011 that it is set to open a new logistics centre in Hanoi, Vietnam. The centre will be located on the road to the main port of Haiphong, providing the company with excellent access to one of Vietnam's major logistics hubs. The 10,000 square metre facility is expected to complete the company's plan to offer a high level of coverage for all the industrial centres in Vietnam, reports Eye for Transport.
Key Risks To Outlook
On the upside, Vietnamese state-owned port operator Vietnam National Shipping Lines (Vinalines) signed a contract in October 2011 with Japan-based Molyto (a joint venture between three Japanese companies: Mitsui O.S.K. Lines, Nippon Yusen Kabushiki Kaisha and Itochu) to construct two berths at the Lach Hyuen port in Northern Vietnam. BMI notes that it is mainly Japanese companies that are developing Vietnam's northern deep sea ports.
We have long highlighted the importance of foreign investment in Vietnam's port infrastructure due to its implications for the country's economic growth. While the southern port of Ho Chi Minh is facing the prospect of overcapacity, there remains a significant demand for deep-water port capacity in the northern parts of Vietnam.
This is because the country is looking to develop deep-water ports in key regions, allowing goods to be shipped directly to their destination markets instead of transshipping through Singapore, Malaysia and South Korea. The Lach Hyuen port is located just 100km east of Vietnam's capital Hanoi, and is expected to eventually replace the nearby Hai Phong port - currently the largest port in the northern region of Vietnam. The Hai Phong port is reaching capacity and does not have adequate infrastructure to handle some of the larger container ships. The Lach Hyuen port expansion will be implemented to address this deficit.
On the other hand, downside risks exist in Vietnam's port sector, due to the rapid growth in the country's port volumes and subsequent concerns that have been raised over the possibility of overcapacity at the Port of Ho Chi Minh. Additionally, there is some sense of déjà vu in the global infrastructure space. Valuations are falling, credit is drying up, demand risk is rising and investors are avoiding risk; factors seem to be aligning for a repeat of the fall of 2009. While we see several red flags in the infrastructure finance market, we do not believe that the market will come to a standstill.
Contents
Executive SummarySWOT Analysis
Vietnam Freight Transport SWOT
Vietnam Political SWOT
Vietnam Economic SWOT
Vietnam Business Environment SWOT
Industry Trends And Developments
Maritime
Intermodal And Logistics
Market Overview
Global Oil Products Price Outlook
Industry Forecast
Road Freight
Table: Road Freight, 2008-2016
Rail Freight
Table: Rail Freight
Air Freight
Table: Air Freight
Maritime And Inland Waterways
Table: Maritime Freight - Throughput, 2008-2016 ('000 tonnes)
Table: Inland Waterway Freight
Trade
Table: Trade Overview
Table: Key Trade Indicators, 2008-2016 (US$mn and % change y-o-y)
Table: Main Import Partners, 2002-2009 (US$MN)
Table: Main Export Partners, 2002-2009 (US$MN)
Political Outlook
Foreign Policy
Domestic Politics
Long-Term Political Outlook
Macroeconomic Outlook
Table: Vietnam – Macroeconomic Activity, 2009-2015
Company Profiles
Vietnam Airlines Cargo
Vinatrans
Vietnam National Shipping Lines (Vinalines)
Vietnam Petroleum Transport Company (VIPCO)
Country Snapshot: Vietnam Demographic Data
Section 1: Population
Table: Demographic Indicators, 2005-2030
Table: Rural/Urban Breakdown, 2005-2030
Section 2: Education And Healthcare
Table: Education, 2002-2005
Table: Vital Statistics, 2005-2030
Section 3: Labour Market And Spending Power
Table: Employment Indicators, 1999-2004
Table: Consumer Expenditure, 2000-2012 (US$)
BMI Methodology
How We Generate Our Industry Forecasts
Transport Industry
Sources Skip to top