Logistics: Riding the recovery of global trade

In 5M21, Vietnam’s import-export value grew 36.4%/30.7% yoy, leading to the 24.2% yoy growth in container volume throughput via Vietnam’s seaports. Cai Mep – Thi Vai achieved an impressive container volume growth of 38.0% yoy thanks to the attraction of cargo from Gemalink which came onstream since Jan-21. HCM and Hai Phong port cluster also recorded high volume growth thanks to the recovery of Vietnam’s import-export. There is no major  change in service fee of major  seaports in 5M21. Due to concerns about high inflation rate in 2021, VNDirect thinks the government may delay the seaport service fee increase to 2022F.

Given the significant gaps in Vietnam’s seaport services fee vs. other countries in the region, the Ministry of Transport (MOT) has proposed to raise Vietnam’s seaport services fee following a roadmap. MOT has submitted the proposal to the government and the draft is being consulted by related parties. Due to concerns about high inflation rate in 2021F, VNDirect thinks the proposal might be approved in 2022F and might have positive impacts on Vietnam’s seaport as follows:

For  the Hai Phong port cluster, downstream ports on Cam river would benefit the most in 2022F. Listed companies have ports here are GMD, PHP, VSC, VGR, DVP. Ports in Haiphong International Gateway port (HIGP) will also benefit in 2023F with PHP and Saigon New Port Ltd (SNP)’s deep-sea water ports here. For  the Central ports, GMD with Dung Quat port may benefit from 2023F. For  the Cai Mep – Thi Vai port cluster, GMD, SGP, SNP are the beneficiaries with deep-water ports here. For  HCM cluster, SNP owns CLL, a container port and may benefit from 2022F. Although SGP’s Sai Gon – Hiep Phuoc is bulk port, its service fee could increase as it becomes relatively cheap compared to container service fee.

VNDirect expects Cai Mep – Thi Vai container volume to grow at 21% CAGR in FY21-23F thanks to (1) improving transportation system, and (2) the capacity to accommodate ultra-heavy container ships, which will generate cost savings and decrease sea transportation time for  carries. SGP with investments in 3 deep-water ports here and GMD with Gemalink will benefit from the robust growth in container volume of Cai Mep – Thi Vai port cluster in coming years.

In the past, deep-water ports here kept losing customers as the transportation system of CMTV is not qualified. However, several infrastructure projects have been deployed to channel the traffic infrastructure in this area and helped boost volume throughput of CMTV, leading to positive NP of all ports here since FY20. With Gemalink phase 1 coming onstream in Jan-21 and might operate at 80-110% of its phase 1 designed capacity in FY21-23F, the remaining ports might be slightly affected due to Gemalink in FY21F but still maintain high growth in FY21-23F.

Based on Ministry of Transportation (MOT)’s master plan for  Vietnam seaports in FY21-30F, VNDirect expects Hai Phong port cluster to grow at a 7.5% CAGR in FY21-30F thanks to favorable macroeconomics and its strategic location. The excess rate is forecast to reduce to 26.3% in FY25F as there are only 2 projects (PHP’s deep-water port and Gemadept’s Nam Dinh Vu phase 2) which will add a total of 1.5m TEUs designed capacity to the cluster.

With the launching of HIGP, a part of exporting/importing cargo is now able to load/unload to mother ships right at HIGP’s ports to go directly to U.S or  Europe, pulling down the logistics cost by 15-20%. The infrastructure is also consistent with the development trends of container ships today, which have grown larger at a rapid pace over the last few decades. In one decades, the average capacity of a container ship has doubled. VNDirect believes PHP with the deep-water port to be started construction in 3Q21F will benefit from the natural superiority in HIGP and the trends of expanding vessels’ capacity.

Truong Tho port cluster must relocate in order to satisfy the development of Thu Duc city, cargo flow is moved to Binh Duong port, which is a strong support for  GMD. As a result, container volume of GMD’s Binh Duong port increased 46% yoy in 1Q21.

Meanwhile, following the development orientation of the government to transform District 2 into a new financial and services center, Nha Rong – Khanh Hoi port and Tan Thuan port of SGP has to relocate. Cargo flow is moved to Hiep Phuoc port cluster, which is well-positioned to received larger vessels and owns larger designed capacity.

VNDirect said, transportation infrastructure projects here are being developed, such as ring-road 2, 3, 4, expressway Ben Luc - Long Thanh will turn Hiep Phuoc port cluster to become the gateway, allowing export-import goods to connect conveniently with other domestic shipments in the area, or  transiting to Cai Mep-Thi Vai for  international shipments.

Overall, GMD and SGP with large capacity ports in Ho Chi Minh port cluster will benefit from this catalyst.

“Short-term risks are the hike in sea freight rates recently due to the container shortages and the congestion in global major  ports. The high rates might reduce sea freight demand, leading to lower cargo volume via global ports including Vietnam. However, we expect global vaccination to alleviate the current congestion and soon reduce the rates to normal levels. Medium-term risks are higher-than-expected oil price leading to higher sea freight rates and reduce sea freight demand”, VNDirect forecasted.