BMI View: We continue to be optimistic towards the Vietnamese shipping industry this quarter, with the port of Ho Chi Minh City and Da Nang both poised to register double-digit container throughput growth in 2015 (10.83% and 12.18% respectively). Tonnage throughput, meanwhile, will also perform strongly over the course of 2015.
The Vietnamese economy will remain on a strong growth trajectory over the coming years on the back of continued export resilience and ongoing reform measures by the government to shore up the country's business environment, factors that are welcome news to the country's shipping industry going forward. As such, we maintain our forecast for real GDP growth to accelerate to 6.4% in 2015 from 6.0% in 2014, and for the economy to grow in excess of 6.0% in real terms over the coming years.
The strong growth showing in H1 2015 owes in large part to continued export resilience despite cooling regional demand, particularly from China and Japan. According to the General Statistics Office (GSO), export growth came in at 9.6% y-o-y in H1 2015, and while this marked a moderation from last year, it was nevertheless a respectable rate of expansion, which is reflected in our healthy shipping forecasts over the short and medium term.
The strong orientation of Vietnamese goods to the recovering US economy will continue to lend a measure of support. As such, we expect Vietnam's export sector to be more shielded from regional weakness relative to its neighbouring peers like the Philippines and Thailand, which will in turn sustain the country's robust economic growth momentum.
Headline Industry Data
2015 tonnage throughput at the port of Ho Chi Minh City is forecast to grow 7.61% to 45.06mn tonnes.
2015 tonnage throughput at the port of Da Nang is forecast to increase 7.48% to 6.47mn tonnes.
2015 container throughput at the port of Ho Chi Minh City is forecast to rise 10.83% to 5.26mn twenty-foot equivalent units (TEUs).
2015 container throughput at the port of Da Nang is forecast to increase 12.18% to 255,060TEUs.
2015 total trade real growth is forecast to increase by 6.65%.
Key Industry Trends
Evergreen Marine Launches Southeast Asian Shipping Route: Taiwan-based container shipper Evergreen Marine Corporation stated on May 8 that it is launching a new shipping service to Vietnam, Singapore and Malaysia in a bid to take advantage of the ASEAN region's solid economy. According to the company, two 1,164 twenty-foot equivalent unit vessels will alternately ply once a week on the new route from May 10 onwards. The vessels will set out from the Vietnamese city of Haiphong and travel to Ho Chi Minh City, Malaysia's Port Klang, Singapore and Port of Tanjung Pelepas in Malaysia, before returning back to Haiphong in a 14-day trip. The new route is the fourth service to be launched by the company in the Southeast Asian market in the last six months, reported CAN in May 2015.
Coal Exports Could Rise To Bouy Shippers: Due to increasing domestic production, Vietnam's Ministry of Industry and Trade (MoIT) is proposing the government to promote coal exports, which should buoy the country's shipping industry, Hellenic Shipping News reported Nguyen Khac Tho, deputy head of the MoIT's General Department of Energy as saying in June 2015.
Shippers Should Benefit From Opening Up Of Economy: The Vietnamese government is aiming to put complaints of protectionism behind it as it strides ahead with plans to scrap a 49% foreign ownership cap across the country and which should encourage renewed investment in the country's shipping sector. Reuters reported in June 2015 that the move is 'one of the country's boldest economic reforms yet, although some sectors will remain restricted'.
Key Risks To Outlook
The Trans-Pacific Partnership (TPP) trade deal will further bolster the rapidly expanding maritime trade flows between Asia and Latin America, as well as reviving the transpacific trade route between North America and Asia. With signs that an agreement could be reached as early as end-2015, the TPP poses upside risk to our shipping and freight transport forecasts over the medium and longer term (2015-2024). The TPP agreement is currently being negotiated by 12 countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam), covering everything from agriculture to pharmaceuticals.
The approval of the TPP and subsequent boost in trade will see the container lines refocus their attention on the transpacific shipping route. The route, linking Asia to North America, is one of the key container shipping connections globally; it has, however, lost some of its prominence in recent years. Container lines have been turning their focus to developing greater coverage on the high-growth emerging routes, such as the Intra-Asia, Asia-Latin America and Asia-Africa services or ensuring economies of scale, by launching larger ships on the Asia-Europe trade route.
Meanwhile, rising geopolitical tensions over territorial disputes in the South and East China seas are raising the risk of a military clash between China on one side and the US, Japan, Vietnam, and the Philippines on the other. This could quickly escalate into a major global crisis. In order to become a major naval power, China first needs to be able to achieve dominance of the South China Sea, through which a large proportion of Asia-Middle East-Europe trade passes. Beijing claims most of the South China Sea, delineated by a so-called 'nine dash line', as its own, and has become more assertive over its claims to the sea in recent years.
This has put China at odds with its neighbours, especially Vietnam and the Philippines, over the ownership of the Spratly and Paracel islands. In recent months, China's construction of artificial islands in the South China Sea has attracted growing criticism from the US and its regional allies, which see the reclamation projects as being aimed at securing Chinese control of the sea, because they contain harbours and an airstrip. Beijing counters that the islands will facilitate search and rescue operations and meteorological forecasting in the area.