September 24, 2018 00:38

Advertisement Contact us RSS Vietnamese

Shipping services fumble about passing “the waves”

15:53 | 09/07/2018

VCN - With restricted capacity on many aspects, Vietnam shipping companies continue to face the gloomy prospects in the international shipping services. Therefore, the exploitation of domestic market and short shipping routes in the region is the way that many enterprises select.

shipping services fumble about passing the waves Companies bear more burdens due to increase in fees from many shipping companies
shipping services fumble about passing the waves Automated system for Customs management and supervision: Shipping lines need to fully and accurately declare information
shipping services fumble about passing the waves Stakeholders seek complete reforms in shipping sector
shipping services fumble about passing the waves

Vietnamese shipping companies are difficult to put on international routes. Photo: ST.

"Old ships”

The biggest weakness of Vietnamese shipping companies is old ships, leading to low competitiveness and low efficiency. Most of the ships were bought in the hot development phase of the market, so the investment costs were high, depreciation was high and the investment capital were mainly from bank loans, so the financial costs and repayment pressures were high. Accordingly, some shipping companies have unbalanced cash flows, leading to the failure to repay the debt to banks and credit institutions. Accordingly, many companies had to sell ships to restructure the fleet, resulting in decline in transport output.

Specifically, Vinaship joint stock company has auctioned Vinaship Ocean ship with a tonnage of 12,367 DWT (ton) and built in Japan in 1985, equivalent to 33 years old. In June, this company also liquidated My An ship (25 years old), built in Japan in 1994. After the liquidation of the ship, Vinaship's fleet will have 8 bulk carrier ships with total tonnage of 148,497 DWT. The average age of the fleet is up to 21, in which, the oldest ship is My Thinh ship, aged 28 years old and the youngest is Vinaship Gold, aged 10 years old.

Meanwhile, at Phuong Dong Shipping joint stock company (Nosco), in January 2018, Hong Linh ship was retrieved by the Maritime Bank and the Vietnam Development Bank for the handling of collateral assets. As a result, the company's fleet fell from five ships to four. Of these, only Phuong Dong 10 ship is the youngest, and was built in 2011, 2 ships were built in 1994 and the remaining one was built in 1993. In order to supplement the fleet for business, the Company may hire ships with a tonnage of between 5,000 and 30,000 DWT to develop and expand its shipping services.

The fleet of Petrolimex joint stock tanker company (PJTACO) has 7 ships, of which 3 ships are over 30 years old, which are not eligible for Dung Quat Oil Refinery Factory, so they are not used frequently. Although the company has just put new Long Phu Ship 11 into operation, helping to increase the fleet capacity to 20%, but it still has not made a profit.

Difficult to join international routes

Shipping companies still face the pressure due to the surplus of long ship supply in the context of reduced demand for ships and the contraction of transportation of major commodities such as iron ore and coal. In addition, Ship owners also face difficulties on the domestic transport market, shipping lines always face the disproportion in goods source in the North and South lines. Shipping lines are forced to accept to carry empty containers, especially on the route Hai Phong - Ho Chi Minh City, affecting the efficiency of exploitation.

According to Nosco's analysis, from 2018, demand for commodities such as gypsum from the Middle East to Vietnam, or coal from Indonesia, Australia and China to Vietnam, will increase due to the high demand for cement factories and thermal power plants. However, for these commodities, the market share of transportation of the Vietnamese fleet is limited due to long waiting time for loading and unloading or lack of two-way transport orders, resulting in low exploitation efficiency. Regarding rice, the export volume to China in the previous years was mainly though cross-border trade, the transport was mainly done by Vietnam shipping companies due to taking advantage of ships of 3,000 DWT. But from 2018, Chinese enterprises mostly buy rice in large volume, for which only a few Vietnamese shipping companies are eligible for, so they are not able to compete with Chinese ships. Vietnam's regular export commodity of wood chips is also mainly transported by specialized ships of China and Japan. There are also few Vietnamese shipping companies investing in ships to carry this commodity. Cassava chip export to China is also mainly transported by Chinese fleet.

Therefore, the Vietnamese fleet will face many challenges when the goods source is not good, the routes are unchanged, most of the goods are low value, and freight competition among Vietnamese enterprises goes on. In addition, the domestic market for goods in 2018 has not improved due to some unresolved bottlenecks at ports, such as passage dredging, insufficient infrastructure and equipment, etc, leading to the congestion at ports. Thus, the time of handling of goods is lengthened, freight costs are increasing and domestic oil price is high, which has led to inefficient operation.

Vinalines assessed that in the coming time, the opportunities for Vietnamese shipping companies are the strong operation of domestic thermal power plants, the development of domestic industrial zones and the promotion of construction market in Phu Quoc will boost demand for transportation.

Looking for advantages in domestic market

Facing such difficulties, shipping companies are forced to seek opportunities in segments where foreign shipping lines have not entered, which is the domestic market. Specifically, Vinalines said that it would be flexible to arrange ships at ports such as Can Tho, Cam Ranh to serve customers besides connecting main ports such as Hai Phong port, Sai Gon port and Da Nang port. To take advantage of the large corporation in the industry, Vinalines will maintain and expand other transportation services to actively and diversify services provided to customers such as trucking, barge etc.

Vinalines will also focus on developing the markets in the Mekong Delta to utilize and effectively exploit the existing infrastructures in Ho Chi Minh City, Vung Tau, Can Tho, Hau Giang, connecting the transportation capacity of the fleet, on the basis of identifying Can Tho port as the key focal point to tranship and attract goods in the Mekong Delta region as well as transit goods to Cambodia. Vinalines plans to invest and upgrade its infrastructure, transport facilities (barges, specialized container ships ...), loading and unloading at ports and specialized container trucks to exploit and open the international container shipping route.

shipping services fumble about passing the waves Vietnam National Shipping Lines to hold IPO in August

The Vietnam National Shipping Lines Vinalines is scheduled to carry out its initial public offering IPO in ...

Meanwhile, Vinaship will focus on negotiating and participating in contracts with large volume, such as transport of coal imported from Indonesia to Vietnam for Duyen Hai 2 and Vinh Tan 4 thermal power plants, combining with transport of cement exported to Philippine to establish a stable order for the fleet. In addition, the company also maintains traditional sources such as rice, rock phosphate to keep the orders for old ships with weak competitiveness. At the same time, cooperating with other shipping lines and seaports to increase competitiveness in the domestic container shipping business. Vinaship will also further exploit new domestic container orders to sustain this business; develop the services of hiring ships, and transshipment barges to supplement the company's fleet in receiving the large orders.

By Khai Ky/ Huyen Trang