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Vietnamese cargo ships face foreign competition

14/09/2016

Vietnamese shipping companies are losing local market share as importers and exporters continue to choose foreign shippers.

According to Le Huy Hiep, Chairman of Vietnam Logistics Association (VLA), there are only 40 foreign shipping companies in Vietnam, accounting for only 5% of the country’s total number of shipping firms. However, they transport up to nearly 90% of the Vietnamese import and exports, mostly to the Europe, the US, the Middle East and Africa.

Meanwhile, over 600 Vietnamese shipping companies handle mainly deal with the domestic and Southeast Asian markets and to date, there are no direct routes between Vietnam and Europe or the US, the country’s biggest importers.

 

Vietnamese shipping companies are losing local market share as importers and exporters continue to choose foreign shippers. 

An additional factor is Vietnam’s aging fleet, with an average 17.7 years old, compared to just 10 years in foreign fleets. Vietnamese logistics firms mainly operate at small scale of operation and weak competitiveness, resulting in high operating costs.

Consequences of dependency

Dependency on foreign shipping firms have caused Vietnamese companies many difficulties. For instance, a range of Vietnamese importers and exporters have been affected by South Korea’s Hanjin Shipping Global possible bankruptcy.  Hanjin announced that it would not accept any new booking of cargo orders from August 31.

Le Duy Hiep, VLA chairman, said that Hanjin is now holding some 5,000 export containers and 5,000 import containers of Vietnamese companies. The Vietnamese businesses are trying to work with Hanjin for the problem settlement and seeking other shipping firms for replacement.

The Ministry of Industry and Trade recommended businesses to quickly complete procedures to receive imported goods at the ports and remove them from Hanjin containers. With regards to export goods which were already inside the firm’s containers, the ministry asked businesses to recover the goods as soon as possible and contact their foreign partners to find ways to change to other shipping firms and to organise delivery schedules.

Hanjin accounted for 5% the Vietnamese logistics market, so sectors with large volume of export such as garments, footwear, timber or fisheries would be affected by the bankruptcy.

Pham Xuan Hong, Vice Chairman of Vietnam Textile and Apparel Association, said that garment and textile companies in Vietnam would face serious losses if Hanjin went bankrupt.

Meanwhile, taking advantages of Hanjin’s bankruptcy, some foreign companies have increased the international shipping prices by 20-30%.

According to Phung Dac Loc, General Secretary of Vietnam Insurance Association, insurance firms are closely following Hanjin’s case. It is facing a high risk of bankruptcy and in the worst situation; companies which signed contracts with Hanjin will be insured.

Vitas Chairman Le Duy Hiep said that Vietnam should have a strategic plan for logistics development, turning it into one of the country’s spearhead sectors. Until now, no Vietnamese shipping companies are strong enough to develop their fleets even at a regional level. Meanwhile, Singapore, Malaysia and Thailand have shipping firms which provide international transport services

dtinews.vn, NLD | September 14, 2016 08:41 AM

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