“The market is currently plagued by an imbalance in supply and demand,” the liner shipping company said in the Vietnam Trade Report covering the first three quarters of 2013. This report cited the Cai Mep International Terminal (CMIT) in Ba Ria-Vung Tau Province as one of the ports that copes with this major challenge.
“The CMIT, the closest deep-water port to the manufacturing zones of southern Vietnam and the open seas, presently finds itself in a market that is operating at around 30% utilization (two million TEU moves a year), well below its six million TEU capacity. This compares poorly to terminals in Europe and North America where such utilization rates are typically well into the 80% and 90% figures,” the report said.
“The CMIT, along with other deep-water ports in Vietnam, is currently grappling with the challenge of oversupply due to the significant flooding of investment into the sector in the mid-2000s.”
Robert Hambleton, general director of the CMIT Co., Ltd., confirmed the current challenge with the Daily after Maersk announced the report. This is one of the major challenges that deep-water ports in Vietnam will have to face next year.
“I think it is not going to be much better than 30% next year,” Hambleton said.
In the report, Maersk indicated the pressure for deep-water ports resulted from a delay in closing some of the inner-city terminals of HCMC and moving the shipping services from these to the newly-constructed deep-water coastal ports as mapped out in the Government’s Port Master Plan.
“As it stands, the deep-water ports are operating with unsustainably low container volumes. Yet at the same time, the shadow inner city ports continue to operate, only adding to the challenge of an over-supplied market,” the report said.
As a consequence, unsustainable pressure was exerted on the pricing for all terminal operators, and the Government therefore moved to impose a price floor rate of US$46 per 20-foot-container move.
“The price intervention from the Government was necessary in order to safeguard the whole terminal industry, since the low charges were reaching dangerous levels. Naturally, shipping line customers voiced concerns as their costs have increased compared to the past, but we are working with them to ensure they understand the rationale for this decision,” Hambleton said in the report.
Despite the challenges, CMIT is confident in Vietnam’s long-term potential, and that the oversupply issue will be addressed given the country’s growth, trade pacts such as the Trans-Pacific Partnership (TPP) and cascading of larger vessels.
Hambleton said as the CMIT currently served the routes linking the U.S., and any partnership that increased trade between Vietnam and North America would likely see a need for larger vessels to service those routes.
Maersk expected the TPP would set the path for the next phase of Vietnam’s economic opening journey as the manufacturing center of the Pacific Rim. It added that Vietnam’s economic outlook remained “broadly positive” with a steady flow of foreign direct investment (FDI) and increasing trade volumes.