Much has been reported about Vietnam’s promising trading prospects, yet its new container terminals in Cai Mep-Thi Vai remain poorly utilised. Four of the six have no regular mainline customers, and the opening of another two has been postponed.
The latest port statistics from Vietnam indicate that although its container traffic continues to increase impressively, growth is still falling short of expectations, implying that obstacles remain to the transfer of manufacturing from China, where labour costs have been surging by more than 20% per annum since 2008.
Growth in the country’s southern container terminals, which serve the important industrial region around the inland city of Ho Chi Minh (HCMC), including Cai Mep-Thi Vai’s port complex (CM-TV) on the coast, 48 kilometres downstream, only reached 6.8% last year, taking total throughput up to 4.9 million teu, following on from 9.6% in 2011. And its northern gateways, including Hai Phong, experienced a 2.6% decline, down to 2.1 million teu, following growth of 11% in 2011.
By contrast, China’s total container throughput reached 160 million teu in 2012, according to Drewry’s global research data.
Moreover, HCMC’s port statistics, including CM-TV, remain grossly inflated in absolute terms because of the large proportion of river traffic moving by barge. As with other river ports, such as Hong Kong and Rotterdam, the transfer from ship to quay, and then from quay to barge (and vice versa) counts as two moves, not one, thereby doubling up on container terminal throughputs normally measured in gantry crane moves.
Approximately 95% of CM-TV’s traffic moves by barge to HCMC. Also, HCMC’s two largest container terminals (Cat Lai – otherwise known as TCCL and VICT), don’t just serve the city’s requirements, they also serve regions further inland, such as Bing Duong and Dong Nai, so even overseas containers arriving there directly by feeder vessels, bypassing CMTV’s deep-water terminals on the coast, are still sometimes confronted with ‘transhipment’ onto barge.
This means that out of the 4.9 million teu handled at the southern gateways in 2012, only around 60% could have consisted of mainline moves. The statistics need to be treated with care, as the way container handling moves are recorded by each terminal is not always consistent. Furthermore, detailed figures have only been available since 2010, with a further refinement of separating domestic import and export traffic being made in 2012.
Judging by the way that container terminal capacity has been added in CM-TV since 2009, much higher growth was expected. Out of the cluster’s six container terminals, only two currently have regular main line customers.
APM Terminal’s CMIT accommodates one Maersk service and one Grand Alliance service (AEX), and Tan Cang International Terminal (TCIT), in which MOL and Hanjin have an interest, accommodates the G6 Alliance’s Loop 1, K Line’s AWE4 service, MOL’s PSX and CHS3 schedules, and the CKYH’s MD3 loop. It is estimated that CMIT currently handles 8,678 moves a week, whilst TCIT handles 9,555 moves.
This is a far fewer number of deep-sea services than in 2011 and early 2012, when CM-TV was buzzing with new transpacific and Asia/Europe schedule announcements.
So what has since changed? Only those involved in the planning stage of the terminals will know for sure, but what seems clear is that Vietnam has turned more towards trading with NE Asia since joining the WTO in 2006, rather than to the US and Europe.
The value of Vietnam’s imports of containerisable traffic from NE Asia increased by a remarkable 373% between 2005 and 2012, up to $51 billion. Although its imports from the EU also grew by an impressive 201%, this only increased the level up to $4.3 billion. The corresponding growth from the US was 197%, but also up to just $2.7 billion.
The value Vietnam’s exports to NE Asia grew by an even more remarkable 542%, up to $28.6 billion, whereas exports to the EU increased by 260%, up to $19.3 billion. The corresponding increase to the US was 234%, up to $16.5 billion.
In other words, Vietnam has had far more need of coastal/feeder vessels than deep-sea goliaths requiring the modern container handling facilities and deep water offered by CM-TV. In this respect, CM-TV’s 48km distance from HCMC is a distinct disadvantage as it is understood that the cost of the six hour barge trip (one-way) often has to be picked up by the carriers. Although the alternative two hour road journey is quicker, it is much longer at 80km so more expensive.
This touches on a totally separate problem concerning the slow transfer of manufacturing from high cost China, that of Vietnam’s poor inland infrastructure. Much of the country is covered in thick jungle, and its two largest cities HCMC and Hanoi are located far upriver, making market access difficult. Out of a total population of 88 million, HCMC is home to approximately 7.2 million people and Hanoi accommodates 6.5 million. Re-locating industries from China is not straight forward, therefore. Supply chain issues cannot be ignored.
Our View
Cai Mep-Thi Vai’s modern deep-water container terminals are unlikely to achieve their full potential without a significant improvement in Europe’s and the US’ economies. Until then, coastal and feeder vessels will continue to serve Ho Chi Minh’s (and Hanoi’s) terminals directly.