Vietnam is planning the launch of a national container
shipping operation designed to combat the dramatic rise in freight costs and
supply chain disruptions experienced during the pandemic. The Vietnam Logistics
Business Association recently mapped out a plan for the development first of
intra-Asia shipping operations that would later expand to international
operations with the support of private capital.
The association points out that there have been many
resolutions in the government on the issue of developing Vietnam’s shipping
fleet, but that none previously progressed. Their new plan is in line with the
government’s goal that by 2045 Vietnam will become “a developed, high-income
country.” Having a fleet of containerships, they said would reduce the “huge
amount of foreign currency” spent by the government on shipping as well as
limit the pressure on foreign shipping lines, exposure to freight rate increases
and surcharges, and provide a tool for long-term economic security for the
country.
About 90 percent of Vietnam’s import and export volume is
transported by sea, reaching 24 million TEU up seven percent in 2021. However,
the country’s current fleet has only about a seven percent market share with
the rest handed by foreign shipping lines. While Vietnam currently has 10
container shipping companies owning 48 containerships with a total capacity of
39,500 TEU, 13 of the vessels are over 25 years old and 15 of the vessels have
a capacity of between 300 and 600 TEU suited only for domestic operations. Only
14 of the ships have a capacity of between 1,000 and 1,800 TEU and can run
routes intra-Asia.
One of the industries that they point to as having been hard
hit by the dramatic increase in freight rates and capacity constraints is wood
exports. The U.S. is Vietnam’s biggest export market for wood and wooden
products, accounting for nearly 60 percent of Vietnam’s total wood exports
value of $14.8 billion last year. Exports to the U.S. alone rose 22 percent to
$8.78 billion in 2021, but high shipping costs reduced profits.
The plan calls for the development of logistic services in
Vietnam by 2025. The first phase would last three to five years and require approximately
$1 billion for ships and a total investment of about $1.5 billion. It would
focus on building services intra-Asia with routes to Korea, Japan, China to
India, and the Middle East, which accounts for about 60 percent of the
country’s import-export volume.
The first year would require a total of 14 ships with
smaller ones with a capacity of 1,800 to 2,500 TEU that could dock directly at
the Hai Phong Port. In the second year, they call for six similar sized ships
to add routes to China and Japan, and starting in the third year more Panamax
ships with a capacity of 4,000 to 5,500 TEU. In total, they call for the
acquisition of at least 25 ships in the first five years, with for example a
resolution not to acquire any ship over 15 years old.
The second phase of the effort to build their national
shipping capability is even more ambitious, but would not be launched for at
least five years while they focus on Asia. They also recognize it would require
“mobilizing private capital for investments,” as well as coordinated
cooperation from manufacturers, shippers, and the government.
To participate on international routes to the Americas,
Europe, or around the world, they envision employing post-Panamax and large
container ships with a capacity of at least 4,000 TEU and more likely between
6,000 and 11,000 TEU. The plan notes that it might even require ultra-large
vessels with a capacity between 11,000 and 14,000 TEU or even 18,000 TEU.
The Vietnam Logistics Business Association considers moving
forward with the plan vital to the long-term development of the country. They
point to Vietnam’s experiences in the 1970s when the country was embargoed and
blockaded. They note that the state bank borrowed more than $45 million to
borrow, buy, and charter a fleet of 19 ships to establish foreign trade.