Vietnam plans $1.5 billion investment to build national shipping line

Vietnam plans to build a national container shipping operation first in Asia and then globally to combat supply chain disruptions (Vietnam Maritime Administration)

Posted on April 15, 2022 at 6:55 p.m. by

The Maritime Executive

Vietnam is planning to launch a national container shipping operation designed to combat the dramatic increase in freight costs and supply chain disruptions suffered during the pandemic. The Vietnam Logistics Business Association has recently drawn up a plan for the development of intra-Asian shipping operations first which 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 maritime fleet, but none have made progress before. Their new plan is in line with the government’s goal that by 2045, Vietnam will become “a high-income developed country”. Having a fleet of container ships, they said, would reduce the “huge amount of foreign exchange” the government spends on shipping, limit pressure on foreign shipping companies, exposure to rate hikes freight and surcharges, and would provide a tool for long-term economic security for the country.

About 90% of Vietnam’s import and export volume is transported by sea, reaching 24 million TEUs, up 7% in 2021. However, the country’s current fleet only holds about 7% share of market, the rest being entrusted to foreign shipping companies. While Vietnam currently has 10 container shipping companies owning 48 container ships with a total capacity of 39,500 TEUs, 13 of the vessels are over 25 years old and 15 of the vessels are between 300 and 600 TEUs in capacity and are not suitable. than domestic operations. Only 14 of the ships have a capacity between 1,000 and 1,800 TEUs and can perform intra-Asian routes.

One of the industries they say has been hit hard by the dramatic increase in freight rates and capacity constraints is timber exports. The United States is Vietnam’s largest export market for wood and wood products, accounting for nearly 60 percent of Vietnam’s total wood export value of $14.8 billion last year. Exports to the United States alone rose 22% to $8.78 billion in 2021, but high shipping costs reduced profits.

The plan calls for the development of logistics services in Vietnam by 2025. The first phase would last three to five years and would require about $1 billion for vessels and a total investment of about $1.5 billion. It would focus on building intra-Asian services with routes to Korea, Japan, China to India and the Middle East, which account for around 60% of the country’s import-export volume.

The first year would require a total of 14 ships with smaller ones of 1,800 to 2,500 TEU capacity that could dock directly at Hai Phong Port. In the second year, they call six vessels of similar size to add routes to China and Japan, and from the third year, more Panamax vessels with a capacity of 4,000 to 5,500 TEU. In total, they ask for the acquisition of at least 25 ships in the first five years, with for example a resolution not to acquire a ship more than 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 as they focus on Asia. They also acknowledge that this would require “the mobilization of private capital for investment”, as well as coordinated cooperation from manufacturers, shippers and government.

To participate in international routes to the Americas, Europe or the whole world, they plan to employ post-Panamax and large container ships with a capacity of at least 4,000 TEUs and more likely between 6,000 and 11,000 TEUs. The plan notes that it could even require ultra-large ships with a capacity of between 11,000 and 14,000 TEUs, or even 18,000 TEUs.

The Vietnam Logistics Business Association considers the continuation of the plan to be vital for the country’s long-term development. They evoke the experiences of Vietnam in the 1970s when the country was embargoed and blocked. 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.