Shipping firms unprofitable, maritime transport industry gloomy

Vinalines incurred the loss of 660 billion dong in the first six months of 2011, Falcon 48 million dong, VTB Vinalines 110 billion dong, Vinashinlines 78 billion dong, while Vosco suffered a loss of 21 billion dong and it could only avoid the loss thanks to the ship selling contract.

Incurring losses

The shipping fees, which saw some signs of recovery in the second half of 2010, have decreased again the first months of 2011 due to the prolonged economic crisis.

In late 2010, a lot of Vietnamese ships focused on exploiting the Middle East and South Asia, which had relatively big volume of trade merchandise and good shipping fees. However, in the first months of 2011, a lot of ships had to stay for many days at Chittagong, Haldia, Vizag, Tuticorin ports, because they could not find goods for the next itineraries.

In fact, there were some orders to carry iron ore and salt from the region to China, Malaysia and Indonesia, but the shipping fees were too low. Goods owners only accepted to pay 16-18 dollars per ton to 30,000-45,000 DWT ships to carry salt from India to the north of China, and 17-20 dollars per ton of iron ore.

The same situation is occurring in South East Asia, where the shipping fee for carrying plaster from Thailand to HCM City was just 10-10.5 dollar per ton, and the fee for carrying the goods to Hon Gai port in the north was 13-13.5 dollars per ton (10,000 DWT ships). Shipping firms could get 18-19 dollars per ton for carrying clinker from Hon Gai to Bangladesh, while the fee sometimes dropped to 17 dollars per ton.

In previous years, equipments and steel products always had higher shipping fees in comparison with other kinds of goods. Especially, there were always high demands for carrying manganese, iron ore or coal from Indonesia to China. However, the demand has decreased significantly, while the shipping fees have become no more attractive.

Due to the lack of goods to carry, a series of ships have been trying to exploit the domestic market, competing fiercely with each other by lowering fees, accepting deferred payment. Shipping fees have been decreasing dramatically as the competition gets stiffer. The fee for carrying clinker from the north to the south, which was 300,000-350,000 dong per ton in late 2010, has plunged to 240,000 dong, the fee level which was once applied in the crisis period

According to the Vietnam Maritime Bureau, by June 30, 2011, the domestic fleet flying the Vietnamese flag only accounted for six percent of the domestic transport market share. Meanwhile, the remaining market share had been held by the 44 ships with the tonnage from 6000 to 27,000 DWT under foreign flags which have the licenses for domestic transport services.

As such, more than 80 percent Vietnamese imports and exports have been carried by foreign shipping firms, because Vietnamese enterprises generally export goods under the mode of FOB (free on board) and import goods under the mode of CIF (cost, insurance, freight). In some cases, even if using Vietnamese ships to carry goods, Vietnamese shipping agents still have to go through foreign intermediaries which pocket part of shipping fees.

Bad management and exploitation

Le Quang Tri, Director of Nam Tinh Corp. – ShipOffer.Com said on Thoi bao Kinh te Saigon, that the bad management and fleet exploitation are the main reason behind the unprofitable performance of shipping firms.

If the above said ships had fulfilled the next orders by carrying iron ore from India or Chittagong (Bangladesh) to China, or carrying salt from India to Malaysia, though with the low fees, they would get the money big enough to pay for fuel. However, the ships’ owners decided to idle from Chittagong to Hai Phong, with no goods inside, traveling a distance of 2786 miles during 10 days, while each day consumed 15 tons of oil (650 dollar per ton). Therefore, the reported loss proved to be understandable.

In fact, Vietnam does not lack experienced ship exploiters and leading maritime brokerage firms. One can see that Vietnamese firms have been serving to sell to foreign shipping firms. It happens that foreign companies charter Vietnamese ships and then ask Vietnamese brokers help them seek goods to carry.

However, it is an intricate question that while the Vietnamese brokerage firms can cooperate well with foreign shipping firms, they do not want to do business with domestic firms, which can be explained by the fact that Vietnam still lacks a proper management mechanism.

According to the maritime bureau, the Vietnamese fleet now has 1689 ships with the total tonnage of 7.5 million DWT.

Source: TBKTSG

Tags: Vietnam shipping industry