Báo cáo ngành vận tải đường biển việt nam 2009, dự báo đến 2014.pdf

Published by BUSINESS MONITOR INTERNATIONAL LTD

Vietnam
Shipping
Report Q4 2009

ISSN: 2040-9826

Including 5-year industry forecasts

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Vietnam Shipping
Report Q4 2009

Including 5-year industry forecasts by BMI

Part of BMI's Industry Report & Forecasts Series
Published by: Business Monitor International
Publication Date: October 2009

Business Monitor International
Mermaid House,
2 Puddle Dock,
London, EC4V 3DS,
UK
Tel: +44 (0) 20 7248 0468
Fax: +44 (0) 20 7248 0467
Email:
Web:

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Vietnam Shipping Report Q4 2009

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Vietnam Shipping Report Q4 2009

CONTENTS
Executive Summary .........................................................................................................................................5
SWOT Analysis.................................................................................................................................................6
Vietnam Shipping SWOT........................................................................................................................................................................................ 6
Vietnam Political SWOT ........................................................................................................................................................................................ 7
Vietnam Economic SWOT...................................................................................................................................................................................... 8
Vietnam Business Environment SWOT................................................................................................................................................................... 9

Sector Overview .............................................................................................................................................10
Container Market Overview...................................................................................................................................................................................... 10
Bulk Dry Overview.................................................................................................................................................................................................... 16
Liquid Bulk Sector Overview .................................................................................................................................................................................... 20

Market Overview.............................................................................................................................................24
Saigon New Port....................................................................................................................................................................................................... 24

Overview.............................................................................................................................................................................................................. 24
Terminals, Storage And Equipment ..................................................................................................................................................................... 25
Expansions And Developments ............................................................................................................................................................................ 26
Multi-Modal Links ............................................................................................................................................................................................... 26
Port of Da Nang........................................................................................................................................................................................................ 26
Overview.............................................................................................................................................................................................................. 26
Terminals, Storage And Equipment ..................................................................................................................................................................... 27
Expansions And Developments ............................................................................................................................................................................ 28
Multi-Modal Links ............................................................................................................................................................................................... 28

Industry Forecast ...........................................................................................................................................29
Table: Major Port Data....................................................................................................................................................................................... 30
Table: Trade Overview ........................................................................................................................................................................................ 31
Table: Key Trade Indicators ................................................................................................................................................................................ 31
Table: Main Import Partners............................................................................................................................................................................... 32
Table: Main Export Partners............................................................................................................................................................................... 33

Company Profiles...........................................................................................................................................34
Maersk Line ......................................................................................................................................................................................................... 34
Mediterranean Shipping Company ...................................................................................................................................................................... 40
CMA CGM........................................................................................................................................................................................................... 45
Evergreen Line Overview .................................................................................................................................................................................... 50
China Ocean Shipping (Group) Company (COSCO)........................................................................................................................................... 55
Hapag-Lloyd........................................................................................................................................................................................................ 60
Neptune Orient Lines (& APL) ............................................................................................................................................................................ 64
China Shipping (CSCL) ....................................................................................................................................................................................... 70
Nippon Yusen Kabushiki Kaisha (NYK)............................................................................................................................................................... 75
Hanjin Shipping Company................................................................................................................................................................................... 80
Mitsui OSK Lines................................................................................................................................................................................................. 85

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Vietnam Shipping Report Q4 2009

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Vietnam Shipping Report Q4 2009

Executive Summary
2009 has been a tough year for the shipping sector - container freight rates have plunged with industry
observers issuing profit warnings for container lines' full-year results. The liquid bulk sector has remained
afloat, as tankers have been used for oil storage purposes. Dry bulk shipping fortunes have fluctuated
from all-time lows, to showing a steady recovery, to dipping once more, as the sector's fortunes have
become increasingly tied to China's raw material needs.
For the Q409 Vietnam Shipping Report we have reviewed our forecast data for total tonnage throughput
and container volumes at the country's ports for 2009, taking into account, where available, the most
recent monthly throughput data. Using one of Vietnam's main ports, the port of Ho Chi Minh City
(Saigon New Port), as an example, BMI has revised its 2009 throughput forecasts for this port. We
believe that for the whole of 2009 the port's total tonnage throughput will fall by 5.15%, y-o-y, with
container throughput set to decline by 4.76%.
As 2009 draws to a close, BMI answers the question of what is next for the Vietnamese shipping sector.
We predict that a steady recovery in the country's ports throughput will begin in 2010. This is based upon
the fact that our Country Risk desk is forecasting Vietnam's total trade to increase by 4.56% in 2010.
Using the Saigon New Port as an example, BMI predicts that tonnage throughput at the port will grow by

5.73%, while container volumes will increase by 5.31% in 2010. This estimate will see the port handling
a total of 20.2mn tonnes and 2.024mn TEUs in 2010.
We have also calculated expected throughput volumes at the port for the rest of the mid term (20112013). For the country's main ports we predict average yearly changes in the total tonnage throughput and
container volumes for the period. This allows us to predict whether or not these changes will enable the
ports to reclaim their pre-downturn levels of tonnage throughput and to reverse ports' 2009 container
decline during our forecast period.
Vietnam's port recovery is reliant on a revival in Vietnam's trade volumes. For the whole of 2009 BMI
expects Vietnam's imports to decline by 15% and its exports to fall by 13%. A gradual recovery is
forecast to begin in 2010, with total trade forecast to grow by 4.56%. Also in this report, BMI predicts
average yearly change in the country's total trade over the rest of the mid term (2011-2013).
BMI does not expect the country's current main trade partners of China, Japan, the US, Singapore, South
Korea, Thailand, Australia and Germany to change dramatically over the mid term.

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Vietnam Shipping Report Q4 2009

SWOT Analysis
Vietnam Shipping SWOT

Strengths

A recovery from the 2009 downturn in throughput volumes at the nation's ports is
expected to begin in 2010, with one of country's main ports, the port of Ho Chi Minh
City (Saigon New Port), expected to recapture its pre-downturn container
throughput level in 2010
Vietnam's location on the South China Sea gives the country access to the main

inter-Asian shipping routes, allowing the country to meet its trading needs
Vietnam's ports feature as ports of call on the Maersk Line, MOL, Hanjin Shipping
and APL services

Weaknesses

The global economic downturn and the contraction in volumes of trade worldwide
are predicted to decrease total tonnage and container throughput by 5.2% and
4.8%, respectively, at the country's main port of Ho Chi Minh City (New Saigon)

Opportunities

Vietnam's Ministry of Transport has plans to invest US$4.5bn in developing the
country's port infrastructure by 2012
Recent port expansions have created direct shipping links with North America and
are attracting major container lines to the country
A gradual recovery in Vietnam's trade volumes forecast to begin in 2010

Threats

The country's total trade is predicted to fall by 14.1% in 2009

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Vietnam Shipping Report Q4 2009

Vietnam Political SWOT

Strengths

The Communist Party government appears committed to market-oriented reforms
necessary to double 2000's GDP per capita by 2010, as targeted. The one-party
system is generally conducive to short-term political stability.
Relations with the US are generally improving, and Washington sees Hanoi as a
potential geopolitical ally in South East Asia.

Weaknesses

Corruption among government officials poses a major threat to the legitimacy of the
ruling Communist Party.
There is increasing (albeit still limited) public dissatisfaction with the leadership's
tight control over political dissent.

Opportunities

The government recognises the threat that corruption poses to its legitimacy, and
has acted to clamp down on graft among party officials.
Vietnam has allowed legislators to become more vocal in criticising government
policies. This is opening up opportunities for more checks and balances within the
one-party system.

Threats

The sharp slowdown in growth expected in 2009 is likely to weigh on public
acceptance of the one-party system, and street demonstrations to protest economic
conditions could easily develop into a full-on challenge of undemocractic rule.
Although strong domestic control will ensure little change to Vietnam's political

scene in the next few years, over the longer term, the one-party-state will probably
be unsustainable.
Relations with China have deteriorated over the past year due to Beijing's more
assertive stance over disputed islands in the South China Sea and domestic
criticism of a large Chinese investment into a bauxite mining project in the central
highlands, which could potentially cause widescale environmental damage.

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Vietnam Shipping Report Q4 2009

Vietnam Economic SWOT

Strengths

Vietnam has been one of the fastest-growing economies in Asia in recent years,
with GDP growth averaging 7.6% annually between 2000 and 2007.
The economic boom has lifted many Vietnamese out of poverty, with the official
poverty rate in the country falling from 58% in 1993 to 20% in 2004.

Weaknesses

Vietnam still suffers from substantial trade, current account and fiscal deficits,
leaving the economy vulnerable as the global economy enters into recession in
2009. The fiscal picture is clouded by considerable 'off-the-books' spending.
The heavily-managed and weak dong currency reduces incentives to improve
quality of exports, and also serves to keep import costs high, thus contributing to

inflationary pressures.

Opportunities

WTO membership has given Vietnam access to both foreign markets and capital,
while making Vietnamese enterprises stronger through increased competition.
The government will in spite of the current macroeconomic woes, continue to move
forward with market reforms, including privatisation of state-owned enterprises, and
liberalising the banking sector.
Urbanisation will continue to be a long-term growth driver. The UN forecasts the
urban population to rise from 29% of the population to more than 50% by the early
2040s.

Threats

Inflation and deficit concerns have caused some investors to re-assess their
hitherto upbeat view of Vietnam. If the government focuses too much on stimulating
growth and fails to root out inflationary pressure, it risks prolonging macroeconomic
instability, which could lead to a potential crisis.
Prolonged macroeconomic instability could prompt the authorities to put reforms on
hold, as they struggle to stabilise the economy.

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Vietnam Business Environment SWOT

Strengths

Vietnam has a large, skilled and low-cost workforce, that has made the country
attractive to foreign investors.
Vietnam's location - its proximity to China and South East Asia, and its good sea
links - makes it a good base for foreign companies to export to the rest of Asia, and
beyond.

Weaknesses

Vietnam's infrastructure is still weak. Roads, railways and ports are inadequate to
cope with the country's economic growth and links with the outside world.
Vietnam remains one of the world's most corrupt countries. Its score in
Transparency International's 2008 Corruption Perceptions Index was 2.7, placing it
in 20th place in the Asia-Pacific region.

Opportunities

Vietnam is increasingly attracting investment from key Asian economies, such as
Japan, South Korea and Taiwan. This offers the possibility of the transfer of hightech skills and knowhow.
Vietnam is pressing ahead with the privatisation of state-owned enterprises and the
liberalisation of the banking sector. This should offer foreign investors new entry
points.

Threats

Ongoing trade disputes with the US, and the general threat of American
protectionism, which will remain a concern.
Labour unrest remains a lingering threat. A failure by the authorities to boost skills

levels could leave Vietnam a second-rate economy for an indefinite period.

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Vietnam Shipping Report Q4 2009

Sector Overview
Container Market Overview
For the Q409 shipping reports BMI's shipping desk set out to answer the most pressing questions for
companies and individuals involved in the box shipping market. These questions are as follows: Just how
bad will 2009 turn out to be? Are the rate hikes going to work? Will there be container shipping line
failures? What's in store for 2010?
Just How Bad Will 2009 Turn Out To Be?
2009 is expected to witness the worst contraction in trade since the Second World War, with the World
Trade Organisation predicting a decline of approximately 9% for the year. The organisation's economists
are forecasting the contraction to hit the developed world hardest with exports predicted to fall by as
much as 10%. Exports in developing countries are expected to decrease by 2-3%. BMI offers an
overview of the indicators that our in-house shipping desk uses to analyse the container market.
The main bellwether economies of the container shipping sector are China, the US and Europe. China is
the major global producer of manufactured goods such as clothes, footwear, toys and electronic
equipment, which are all shipped via container from China's east-coast ports. The US and Europe are the
main markets for these products, and so are the major destinations for container ships.
To gauge the supply side of the global shipping sector, BMI uses one of its in-house indicators to assess
the current atmosphere. BMI's quarterly textile report forecasts that the export growth of Chinese textiles
and clothes will slow in 2009 to just 7.5%, compared with the sector's 2008 year-on-year (y-o-y) increase
of 20.1%. We forecast that this sector's growth projections will begin to recover in 2010, with a y-o-y
increase of 14.5% estimated. This 2009 decline in export growth will have a negative effect on the global

shipping sector as fewer exports will require fewer ships.
The effect of this decrease in the export of textiles and clothing, as well as other manufactured goods, can
be seen by the decrease in throughput at China's major ports. The South China Morning Post reports that
volumes handled at China's major mainland ports have been declining, with the port of Shanghai's
operator, the Shanghai International Port Group (SIPG), reporting a container throughput fall of 17.8%
in June 2009 y-o-y. This fall shows a deepening trend of decline, as it is steeper than May 2009's 12.4%
decrease.
This decline in China's export of manufactured goods has been brought on by the lack of demand from
the country's major customer, the US. The US economy is in recession, with job losses and a weakened
real estate market. The knock-on effect has been the reduction of the country's buying power, or at least a

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reduction in consumer willingness to spend. The Conference Board's Consumer Confidence Survey,
which is complied by a sample of 5,000 US households, notes that in June 2009 consumer confidence fell
with the index declining to 49.3 (1985 = 100), down from its 54.8 level in May 2009. In a press release
Lynn Franco, the director of the Conference Board consumer Research Center, states that 'after back-toback months of strong gains, consumer confidence retreated in June. The decline in the index, caused by a
less favourable assessment of business conditions and employment, continues to imply that economic
conditions, while not as weak as earlier this year, are nonetheless weak. Looking ahead, expectations
continue to suggest less negative conditions in the months ahead, as opposed to strong growth.'
BMI notes that the decline in US consumer confidence can be seen in the fall in the nation's retail sales.
According to data from the US Consensus Bureau, retail sales stood at US$298mn in April 2009 (last
released data) down 10.45% on April 2008's figure of US$332.7mn.
The reduction of demand for consumer products has had a knock-on effect on the shipping sector, which
can be seen through container throughput volumes at the major US container port of Los Angeles.

Container throughput for May 2009 (latest released data) shows that container volumes at the port
declined 16.31% y-o-y to 574,827TEUs, bringing the port's throughput decline for 2009 as a whole to 16.16%. The main area of decline in the port's container throughput figures was inbound containers
loaded, the volumes of which fell by 18% y-o-y.
The other major bellwether for container shipping demand is the European market. BMI notes that a
number of major European countries that would usually have high consumer demand are currently in
recession, which has dampened confidence. The major consumer markets of the UK, Germany, the
Netherlands, Italy, Spain and Finland are all classed as having entered a recession. The knock-on effect is
less spending power leading to less demand for consumer goods.
The impact upon Europe's shipping sector can be seen through the decline in volumes on Asia-Europe
routes. The European Liner Affairs Association (ELAA) compiles statistics from its members, which are
made up of the 27 main box ship operators (with only MOL and K-Line as absentees). ELAA data for
Q109 show that Asia-Europe trade volumes fell 22% y-o-y. A decline of 25% was recorded for April
2009 (last available data).
Are The Rate Hikes Going To Work?
The 14 members of the Transpacific Stabilisation Agreement (TSA) announced in July 2009 that they
planned to go ahead with the second phase of their rate fight-back by increasing freight rates on 40-foot
equivalent units (FEUs) by US$500. This announcement followed news from Drewry Shipping
Consultants that the average rate for a Hong Kong to Los Angeles sailing has fallen to US$900 per FEU,
compared with a rate of US$2,000 in the same period in 2008. The decision to place a floor on freight
rates could see shipping-line contracts with shippers negotiated two months on (May 2000) from when

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they were first agreed, if original contracts do not provide some form of interim rate adjustment. The
reason for the TSA's decision to increase rates is, according to the association, down to the fact that 'if

current rates were extended over 12 months, it is likely that the trade will encounter significant financial
challenges as well as basic service sustainability issues going forward'. TSA members have also stated
that they will implement a quarterly bunker charge and that they may add a peak-season surcharge if the
market strengthens.
BMI notes that the TSA initiated its rate-hike plan in March 2009, calling a halt to the decline in rates
that had prevailed on Asia-US routes since Q408. The TSA's first step was to end reduced short-term/spot
rates by the end of June 2009. We note that the very nature of the TSA should guarantee a certain amount
of success as the rate hike has been agreed upon and so will be adhered to by the TSA's 14 members,
which are the major players in the Asia-US container shipping sector (Maersk Line and MOL being the
most obvious absentees). BMI notes, however, that reports following the TSA's rate increase
announcement cast doubt on the price hike's success. Lloyd's List quoted NOL as stating that 'the TSA
regularly issues guidelines on freight rates and other issues. However, individual carriers have a
mandatory right of independent action over whether or not to adhere to these guidelines'. NOL cast
further doubt by stating that 'there is no assurance that APL can successfully implement the quantum of
freight rate increase as outlined in the TSA guideline'.
The other major indicator of the state of the container shipping market is the Asia-Europe route. BMI
notes that the success of rate hikes on this route is even more in doubt as there are no liner conferences to
offer rate benchmarks. Liner conferences were banned in the EU's maritime sector in October 2008 when
the block exemption regulation came into force.
BMI notes that container lines are currently trying to push through the second rate hike of the year on this
route, in time for the peak shipping season. Major liners to have declared their intentions to hike rates on
this route to date (July 8 2009) are Maersk Line, CMA CGM, Zim and Hapag-Lloyd. BMI notes that
the success of a rate hike on Asia-Europe routes is heavily reliant on all the major container companies
hiking rates, as lines that hang back in a bid to gain clients by keeping rates at an unsustainable level will
condemn not only themselves but the industry as a whole.
One reported example of a company breaking ranks and not only stalling on raising rates but apparently
cutting them is the Chilean container line Compía Sudamericana de Vapores (CSAV), with Lloyd's
List quoting an unnamed Chilean freight forwarder as stating that 'they have indeed lowered rates to
levels that others cannot follow.' CSAV denied the reports with the company's director, Victor Pino,
quoted by Lloyd's List as stating that 'if all the companies lift their rates, CSAV will do so as well'. BMI

notes that it takes just one company to keep freight rates at an unsustainably low level to condemn a
freight rate hike to failure.

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BMI also notes that other popular liner conferences on other container shipping routes are following
Asia-US and Asia-Europe operators' examples and are increasing shipping rates. In June 2009 the Asia
Australia Discussion Agreement (AADA), whose members are ANL, CSL, COSCO, Hamburg Sud,
Hanjin, Hyundai Merchant Marine, K-Line, MSC, MOL, NYK, OOCL, Gold Star and Zim, agreed
to increase freight rates by US$325 per 20-foot equivalent unit (TEU) and US$650 per FEU from July 10
2009. BMI believes that like fellow liner conference association the TSA, the AADA hike will only be
successful if all its members adhere to it.
Will There Be Container Shipping Line Failures?
Yes, and they have already started. Drewry Shipping Consultants believe that 'the basic make-up of the
industry will change as companies either go bust, amalgamate or shrink, shedding assets and personnel in
the process'. Maersk Line's CEO, Eivind Kolding, appears to be of the same view, stating in an interview
with the Financial Times Deutshland that he believes that some lines would not survive beyond 2010.
A company's ability to survive the downturn depends on the company's financial health and its strategy
for weathering the downturn. It is difficult to assess a company's financial health, but a firm's downturn
strategy is more easily accessible and so offers an insight into how the company is handling the drop in
trade volumes.
BMI's shipping desk has noted the raft of cost-saving initiatives that the major container lines have so far
launched in our Q3 Container Shipping Overview. A number of the main box lines announced how much
they plan to save in 2009 and also how they plan to do it. The main strategies that we have noted so far
are rate hikes (which we have covered in a separate question), personal layoffs, service-sharing

agreements, idling vessels, deferring newbuilds, and scrapping. BMI offers an up-to-date, in-depth
overview of each of the top 10 liner companies' strategies in the Company Profile section of its shipping
report, and in the Q4 Container Overview will offer a more general global view of the differing strategies.
The popularity of route-sharing agreements has increased over 2009 as lines join up with their
competitors in a bid to stay active in as many regions as possible and so cater to their clients' needs and at
the same time decrease the number of vessels they have running, to save on operating costs. The most
prolific route sharing route is Asia-Europe. BMI notes that the most recent route-sharing pacts for AsiaEurope services took place in June 2009, with Taiwan's Evergreen Line and the China Shipping
Container Line linking up and the Shipping Corporation of India and the Mediterranean Shipping
Company also uniting.
Laying up vessels has been a common strategy in 2009, as a way of decreasing overcapacity. Major lines
including Maersk Line, CMA CGM, K-Line and CSCL have all deployed this tactic. According to the
latest reports, the global shipping fleet that is currently idled stands at 9%. Of the global containership
fleet, 564 vessels, approximately 11.4% of the total fleet, is laid up. The most popular areas for container

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ship lay up are off China, Hong Kong and Singapore. BMI notes that this allows ship owners easy access
to the main Asia container facilities when they decide to bring these ships back into operation.
Laying up of new vessels or those in their prime is a wise tactic for combating a saturated market. BMI
notes that 2009 has also seen an increase in scrapping, as owners rid themselves of older vessels. It is
understandable why ship-owners would take the scrapping route in such a climate, when the value of
operating a ship has depreciated with the decline in trade volumes, especially with reports surfacing that
US$200 can be made for every tonne of scrap metal. A.P. Moller Maersk's Tom Peter Blankestijin, who
is involved in the company's ship recycling, told the Times in July 2009 that the company planned to
scrap 20 ships in 2009 compared with the 27 ships that they have scrapped in total over the past eight

years. The Paris-based consultancy AXS Alphaliner has estimated that as much as 300,000TEUs' worth of
container ships could end up on the scrap heap in 2009. This would place scrapping for the year at 10
times higher than the historical average, and would also see 2009 record the highest level of scrapping
ever seen.
In a bid to bring the problem of overcapacity under control, shipping lines have been entering into
negotiations with shipyards in a bid to defer or in the worst case cancel their newbuild vessel programs.
As BMI has noted previously, the delivery of newbuilds is threatening to flood an already oversaturated
market. These newbuilds are also endangering any possible hope of a short-term recovery. Although BMI
expects trade volumes to pick up in H210, a situation which should have a positive impact on the
container shipping sector, the benefit of a gradual recovery in global trade could be negated by the fact
that there are still too many ships on the market and so freight rates could be kept down.
BMI notes that the major container shipping players, Maersk Line and COSCO, have announced that they
have negotiated newbuild deferrals with their respective yards. As far as container newbuild cancellations
go, we are aware of only one instance so far, that of Zim, which cancelled its order for six vessels earlier
this year.
The above strategies concentrate on tackling the major problem haunting the global container sector:
overcapacity. During the boom years box lines built up their fleet to cater for the growing demand; they
have now been left with surplus vessels as trade volumes have plummeted. Companies that are struggling,
refusing to decrease their current fleet size and refusing to adjust their newbuild plans are the companies
that are more likely to end up on shipping analysts' watchlists. BMI asserts that now is not the time to be
concentrating on competing with peers over the size of fleets. An example of how such a strategy can
land a company in dire straits is Zim Integrated Shipping Services. The company had complied a
considerable order book in a bid to increase its fleet size and move up the ratings table. The company has
so far had to cancel six of its newbuild vessels. Even with the cancelling, Zim's newbuild order book is
still considerable, and according to AXS Alphaliner, ranks as the sixth largest in the Paris-based

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consultancy's top 100 box line league despite being placed 18th in terms of current fleet size. Zim,
therefore, is one company that overstretched itself and came close to being in dire straits.
BMI believes that the likely downturn casualty candidates in the box shipping community are those
working in niche sectors, which might struggle to diversify. These companies will be reliant on being
rescued either by their respective governments or by financial institutions. The most recent case of this is
Iceland's Eimship, which looks set to be saved from failure with the sale of the company to its creditors.
The Eimskip brand will be re-launched as New Eimskip and will be majority owned by the Icelandic
Bank Landsbanki and the US investment group Yucaipa.
BMI doubts that any of the top 10 container lines will fail as they will have easier access to finance.
Having said that, one major line has so far gone bust in 2009. In February 2009 Senator Lines, the
German subsidiary of South Korea's Hanjin Shipping went under. At the time BMI noted that the
severity of crisis the container sector faced in 2009 could be seen from the fact that a major shipping line
(Hanjin) had been unable to step in and help its struggling subsidiary. BMI notes that two other major
box lines have also had close shaves in 2009. In May 2009 Chilean shipping company CSAV faced an
uncertain future until it agreed a financing programme with its German owners. A similar fate was faced
by Zim until its parent company Israel Corp stepped in with a loan of US$150mn.
What's In Store For 2010?
BMI believes that we are currently entering into the trough of the container shipping downturn, meaning
the situation will not get any worse. This belief is based upon the fact that scrapping of ships is
accelerating as it becomes more financially viable for ship owners to scrap older vessels rather then
continue paying lay up costs. The Paris-based consultancy AXS-Alphaliner estimates that containerships
equivalent to 184,700TEUs were scrapped in H109 - roughly the same volume taken out of service
between 2003 and 2008.
Scrapping will ensure that fleet numbers are reduced, and will address the issue of overcapacity in the
market, as long as deferred new-build programs do not flood the market. In July 2009 Taiwan's Evergreen
announced that it plans to dismantle 31 vessels over the next four years - roughly a third of the company's
total fleet. BMI believes that other container lines are also turning to the scrapping strategy.

One industry observer, Martin Stopford, the managing director of Clarkson Research Services asserts that
once the low point in the market has been reached a period of intense scrapping is necessary to correct the
imbalance between vessel supply and demand and to allow for a recovery. BMI believes that in trade
terms the first ripples of a recovery will begin to appear in H210. This analysis is based upon the fact that
the majority of the markets that we cover are expected to record positive total trade growth figures in
2010. We assert, however, that although shipping's recovery will be aided by this increasing trade, the
strength of the recovery depends on shipping companies decreasing supply.

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Bulk Dry Overview
The dry bulk shipping sector made a partial recovery in H109 after charter rates fell by more than 90%
during the final quarter of 2008. Rates rebounded sharply in April and May, as the average daily charter
rate for Capesize vessels soared from US$18,000 in early April to US$93,000 at the start of June, before
finding a plateau in June and July from which point they have yo-yoed, gaining and falling in quick
succession over a period of weeks. We expect this volatility to continue in Q409 as the demand and
supply of raw materials fluctuates in line with a slow and hesitant global recovery. We caution that there
remains a risk of a further marked decline in the Baltic Dry Index as Chinese demand for commodities
slows and other major import nations struggle to fill the gap in demand.
BMI highlights some of the key concerns facing dry bulk operators over the rest of 2009.
China's Commodity Boom Drives the Market, But For How Long?
Strong Chinese demand for dry bulk shipments has kept the sector afloat over the past few months with
total iron imports rising by 29% year-on-year during H109, closely followed by other major seaborne
commodities such as coal, copper, aluminum and soybeans.
We see increasing levels of Chinese demand as a core long-term trend as China's economic development

recovers from its 2009 blip and construction and industrial growth drive steel production. The majority of
this demand will be met with iron ore from overseas sellers since China's own iron ore mining sector is
highly fragmented and is reportedly far less cost effective than Brazilian, Australian and Indian mines,
leading The United Nations Conference on Trade and Development (UNCTAD) to forecast a 'severe' fall
in Chinese iron ore production in the next few years. Evidence of this long-term trend has been seen in a
spate of long-term supply contracts signed over the past few months by producers and major bulk
shipping lines including Mercator Lines, Mitsui OSK (MOL) and NYK.
The short-term outlook, however, may be different, and most observers are predicting a marked drop in
iron ore shipments to China in H209. There are several factors behind this forecast, the most obvious of
which is price. Much of China's incessant import drive has been the result of traders and speculators
taking advantage of a sharp drop in spot ore prices by stockpiling the commodity and waiting for prices to
rise before offloading into the market. Spot prices have risen sharply in the past few months from a low of
just US$62.5 in April to approaching US$100 at the time of writing.
As much as 100mn tonnes of iron ore stock has been built up at Chinese ports, according to China Daily,
which cites the vice-general manager of Rizhao Port, Zang Dongsheng. China's Iron and Steel
Association has warned that the country's iron ore imports in H109 were excessive, greatly surpassing the
needs of the country's steel industry. According to Dongsheng, current stockpiles are equivalent to three
months' supply, suggesting that import demand will reduce, at least in the short-term.

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Meanwhile, the price dispute between Chinese importers and Australian mining firms, which escalated
into four Rio Tinto employees being detained by Chinese authorities in July on suspicion of espionage,
looks certain to dampen the frequency of shipments to China over the coming months. Dongsheng
expects the drop in orders from Australian mills to start to translate into reduced shipments in Q3 and Q4.

'Customers have reduced their orders from Australia and are turning to Brazil. Although it is difficult now
to quantify the precise figures, they will be available in September,' he said.
To what extent this will affect demand for dry bulk transport remains to be seen, but it is likely to result in
a noticeable slowdown in shipments. A Reuters poll of eight analysts forecast the decline at around 20%,
with imports of 236mn tonnes in H2 as opposed to 297mn in H1. It is hard to overstate the impact of
Chinese ore demand on the market in 2009 and what a decrease might mean for the industry. In a typical
year the shipment of iron ore represents roughly 50% of total seaborne dry bulk cargo. Of this, Chinese
demand typically accounts for 50%. As such, a quarter of all dry bulk cargo in a given year is made up of
iron ore shipments to China. In 2009, however, this percentage is likely to have been far higher as
Chinese demand has risen y-o-y while demand elsewhere has plummeted. Much will be expected of
major commodity importers outside China if the gap is to be filled.
Who Will Fill The Void?
The sector needs a global economic recovery, rather than merely a Chinese one. There are indeed
promising signs of growth in manufacturing and industrial output in a number of key import markets.
Global crude steel production rose by about 3.9% month-on-month (m-o-m) in June with gains in total
tonnage produced from most major steel producing markets including Japan, the US, Germany, and
Russia. This is good news for the dry bulk sector, which will be looking to stockpiles of iron ore and
coking coal to start to decrease as steel mills begin to eat up supplies, driving demand for new shipments.
Japan, the world's largest coking coal importer and second largest importer of iron ore, has shown
encouraging signs of growth. Industrial production rose 2.4% month-on-month in June and by 8.3%
quarter-on-quarter for Q209 as a whole. Observers are expecting gains in industrial output to continue
into H209, which would provide a considerable boost to the dry bulk market. Japan is the third largest
global steel producer, after China and the US, with 9% of world output in 2008, and a major destination
for raw material shipments, accounting for 23% of global coal imports in 2005.
However, the picture from the US, another key driver of dry bulk shipments, is not quite so promising.
The US is a major importer of steel products, which account for 19% of global seaborne dry bulk cargo,
however, imports have fallen sharply since the start of the downturn on weak demand for homes and
vehicles. Despite encouraging signs of a recovery from some sectors of the economy, steel shipments
were showing no sign of a recovery in June when, at the time of writing, the latest figures were released,
falling by 18% m-o-m and 69% y-o-y. In South Korea too, commodity import demand has remained

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weak as the country's steel industry shows little sign of a recovery with output falling by about 6% m-o-m
in June.
When taken as a whole, we caution that a more concrete recovery from major industrial nations is needed
for the effect of China's falling import volumes to be nullified.
Is Overcapacity Still A Threat?
H109's rise in demand for dry bulk shipments, coupled with severe congestion at major export terminals
in Brazil and Australia, did much to reduce the number of inactive bulkers in circulation. The percentage
of vessels placed in lay-up is estimated to have fallen from a peak of about 8% at the trough of the market
in late 2008 to around 5% at the time of writing. We caution that the current wave of optimism sweeping
through the dry bulk sector may ultimately prove to be detrimental in the longer term, however, as instead
of scrapping older vessels and holding back on new orders, ship-owners find themselves in a position to
take advantage of the current spate of high demand.
A report by Drewry Shipping Consultants, cited by Hellenic Shipping News, shows that the rate of
scrapings within the dry bulk sector has slowed significantly as shipments have risen in recent weeks.
According to Drewry, just 269,000dwt of bulk vessels was recycled in June, down from 1.2mn dwt in
May. Part of the reason for this, they explain, is that older vessels aged over 25 years are being
recommissioned rather than scrapped in order to fulfill what is likely to be a temporary surge in demand.
A significant fall in scrapings is likely to prove detrimental to the industry over the longer term, however,
as newbuild deliveries, ordered at the height of the boom in 2007 and 2008, increase over the next few
months. The risk is that a surge in newbuilds at a time of falling demand due to China's import cutbacks
will result in supply again overtaking demand and pushing down rates. Vessel scrapings will need to
recover their earlier pace in order to mitigate this risk.

How Are Companies Faring?
The majority of shipping lines operating in the dry bulk sector have seen their fortunes rebound
significantly in 2009 after charter rates recovered from a drop that saw them fall to their lowest levels
since the mid 1980s. A recovery, led by a surge in demand for shipments, may even have saved many
lines from bankruptcy. However, companies without access to lucrative Chinese markets are still yet to
see a significant upturn in fortunes as major commodity importers of Japan and South Korea have
suffered downturns curbing demand for commodities.
The South Korean dry bulk market has been one of the most severely affected, and in April 2009 the
extent of the crisis became clear after Seoul-based Samsun Logix, the country's ninth largest shipping
line, filed for bankruptcy in March citing a 'meltdown' in the dry bulk sector. The South Korean
government has since announced plans for a KRW4trn (US$3bn) fund to be managed by state-run
investment firm Kamco after an official from the Korean Ministry of Land, transport and Maritime

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Affairs, quoted by JoongAngDaily, warned of a 'domino-like collapse' that threatened to spill into other
areas of the maritime sector. In July, bulk carrier Daewoo Logistics became the next big player to file for
bankruptcy after the collapse of a planned sale of the company to domestic steel prouder Posco.
According to the Financial Times, companies reported to be ready to offload vessels to the fund include
Hanjin Shipping, Hyundai Merchant Marine and STX Pan Ocean.
Meanwhile, for a number of global operators the past few months have returned rich results. Japan's
MOL, the world's largest iron ore carrier, appears to be bucking the industry trend of reducing
expenditure during the downturn, boldly announcing plans for a major company acquisition in 2009.
While no details were presented, senior managing director, Kenichi Yonetani, indicated that the company
was willing to spend 'several tens of billions of yen' buying a smaller company.

Meanwhile In June and July MOL, along with major rivals NYK and Mercator Lines, signed long-term
contracts of affreightments with iron ore miners Rio Tinto and Vale for regular iron ore shipments to
China. Such is the projected demand for the commodity from China over the long term that an increasing
number of companies in the mining sector have taken the additional step of developing their own
shipping fleets in order to curb reliance on third parties altogether. Vale itself has a US$2bn newbuild
programme in place and received its ninth very large ore carrier (VLOC) of the year in July 2009. The
company plans a fleet of 14 newbuild vessels. While the company awaits its newbuilds, Vale is
purchasing a second-hand fleet, buying a Capesize vessel from OceanFreight earlier in July 2009. Indian
steel producer Vizag Steel is also developing its own fleet. VinaMaso reports that, according to unnamed
sources, Vizag aims to acquire three-four 170,000 dead weight tonne (dwt) Capesize vessels on the
second-hand market. This strategy would see the company move away from relying on Indian chartering
agency Transchart.
Predicting The Bulk Market's Next Direction
Predicting the exact movements of the dry bulk shipping sector has proved a difficult and often fruitless
task. However, most observers, BMI's shipping desk included, agree that the market faces continued
volatility over the remainder of 2009 as supply and demand balances take time to readjust to reduced
Chinese demand and a gradual recovery in global industrial activity. Other factors such as rising fleet
capacity and reduced vessel scrapping may also threaten to derail what is still a vulnerable market in the
early stages of recovery. What is for certain is that the dry bulk market in 2009 is unlikely to scale the
heights witnessed in H108 when the global commodity boom drove rates to record levels. Most operators
will be setting their sights on a slow, sustained recovery, which will continue into 2010 as the world
fights its way out of the economic downturn.

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Liquid Bulk Sector Overview
We expect a tough operating environment for the liquid bulk shipping sector in Q409 as a weak global
economy continues to curb demand for crude oil and other oil products, reducing demand for shipments.
As global commodity prices have rallied in 2009, recovering from the price collapses over H208 and
continuing into Q109, dry bulk lines have profited from increased demand for maritime freight. However,
this trend has yet to be replicated in the tanker sector, where charter rates have continued to trend
downwards. Weak crude oil demand from western markets - notably the US and the eurozone region continues to result in lower shipments, and tanker rates have continued their fall from the highs witnessed
in 2009. Despite a brief upward surge in June, the Dirty Tanker Index, which tracks average rates earned
by crude oil carriers per barrel, was around US$3,475 at the end of July - a year-on-year (y-o-y) decline
of almost 60%. Clarkson Shipbrokers are forecasting tanker demand to fall by 2.1% on average in 2009,
and a fleet growth of 8.9% will further undermine rates by increasing supply above current levels.
BMI looks at the major trends within the liquid bulk sector including the risks to the market during Q409
and 2010.
Weak Crude Oil Demand Curbing Shipments
Despite the emergence of specialised energy products such as liquid natural gas (LNG) in recent years,
Crude oil demand continues to be the main driver of the liquid bulk market - crude oil shipments
accounted for approximately 57% of total seaborne energy trade in 2006, followed by refined oil
products, which accounted for 21%.
2009 has been an especially turbulent year for the crude oil market, with prices having risen from a low of
US$33 per barrel in December 2008 to above US$73 in late June. Recent price gains fail to disguise the
fact that demand in major markets is still weak and much of the increase in price has been attributed to
supply cuts rather than any marked upturn in demand.
The crude oil shipping market continues to be dominated by demand from the developed world - notably
North America and Western Europe, which account for 30% and 24% of global demand respectively.
Deep recessions in both regions have hence had a severe effect on shipping demand, with the IMF
forecasting US GDP to contract by 2.8% in 2009 and eurozone GDP by 4.2%. The effect of the global
economic recession has led the International Energy Agency to forecast that crude oil demand will
decline on average by 2.5mn barrels per day in 2009.

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While much has been said about the beginning of a global economic recovery in recent weeks, western
demand for crude is still forecast to remain below pre-downturn levels in 2009, and BMI expects OECD
demand to decrease by 2.8% over the year as a whole.
Much of this weakness is due to the still weak state of the US economy, and BMI's oil and gas desk
expects US crude oil demand to fall by 3.2% over the year as a whole. Cyclical demand drivers appear to
have had little effect on demand. Data released by The American Petroleum Institute (API) for the week
ending July 17 showed a rise in US crude oil inventories for the first time since April, increasing by
around 0.9% at a time when stockpiles are normally driven down by rising consumer demand over the
summer 'driving period'. Meanwhile, the outlook for the US trucking industry - another key driver of
global crue oil and petroleum demand - continues to look precarious. The American Trucking
Association's (ATA) Truck Tonnage Index fell by 2.4% m-o-m in June on a seasonally adjusted basis,
after rising by 3.2% in May. As US unemployment continues to rise, consumers are still cautious in their
spending on petrol and other oil products, and we expect little or no improvement in demand levels
during the remainder of 2009.
Meanwhile, the major source of a rise in global demand for crude oil shipments is likely be the world's
second largest crude oil consumer, China, which accounts for roughly 6% of global consumption.
Following poor Q109 growth, the Asian powerhouse has since shown increasing signs of accelerating
economic activity and indications of a recovery in China's manufacturing and industrial sectors led to
strong oil import growth in Q209 as crude imports for June rose by 14% y-o-y at 16.6bn barrels. We
expect this to continue in Q409 and into 2010 as China's economy regains momentum.
Oil Supply Cuts
An ongoing threat to tanker operators will be ongoing supply cuts by OPEC member states that together
control a dominant share of the crude oil market, including 40% of global supply and 59% of the output
form the Middle East and Africa - the main suppliers of crude to the US and Europe. OPEC has enforced

production cuts of 4.2mn barrels per day since September 2008, which has significantly reduced the
volume of oil available for transportation, resulting in fewer shipments.
With oil prices approaching the organisation's reported target price of US$75 per barrel, further supply
cuts are unlikely in the short-term, meaning that shipments from key producing nations Africa, the Middle
East and South America are not expected to suffer further reductions. However, output levels set in May
2009, which are likely to remain unchanged over Q409, to reduce the risk of further price falls while
inventory levels in the developed world - which stood at 62.5 days worth of demand at the end of May,
according to the International Energy Agency - are still reported to be substantially higher than OPEC's
desired level. As such, despite a return to the organisation's benchmark oil price level, production levels
are expected to remain unchanged, suggesting that shipments from member states are unlikely to rise
significantly from their current levels before the end of the year.

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Offloading Floating Storage
Meanwhile, the oil price gain over the past few months has done much to unwind the contango in oil
pricing which had given rise to the growing trend of oil tankers being used as floating storage facilities.
With little profit to be made from storing oil at current prices, floating stockpiles have gradually been
offloaded into refineries and the number of supertankers on hire for storage purposes fell by a third
between March and July to an estimated 30 vessels. We expect this trend to continue in Q409 as prices
rise, pushing more vessels back into circulation with the effect of increasing the supply of vessels in
circulation. Lowering the supply of large tankers competing for business on spot markets has had the
effect of propping up rates, which might otherwise have suffered the same level of collapse as the dry
bulk sector. The return of tankers back into what is already a weak market is expected to have a
noticeable downward effect on freight rates as the gap between capacity and demand widens.

However, one potential upside is the trend in tankers being used to store clean oil products such as
gasoline. One particular incidence hit the headlines in June when US investment bank JP Morgan was
reported to have chartered a newbuild very large crude carrier (VLCC) to store refined gasoil off the coast
of Malta in a short-term 'opportunity-driven' venture. Brokers cited by Hellenic Shipping News said the
vessel, named the Front Queen, was hired at a cost of between US$35,000 and US$41,000 a day - low
enough to allow for a profit for the onward sale of the product at a higher price. In storing refined fuel
rather than crude oil there may still be money to be made from delivering ready fuel straight into
circulation without the need for refinery costs. The practise of storing distilled oil products is usually
prohibited by the fact that tankers are contaminated from previous crude oil storage; however, in JP
Morgan's case Front Queen was reported to be a new, 'clean' vessel that would not affect the quality of
the fuel.
Overcapacity Still A Concern
Nevertheless, excess capacity continues to be one of the major concerns facing tanker owners in the shortto mid term, with tanker owners having displayed the same trend for over-ordering at the peak of the
market as operators in the dry bulk and container market. The global tanker fleet is estimated to have
expanded in size by approximately 6% y-o-y between 2005 and 2008 and Clarkson Shipbrokers are
forecasting a fleet growth of 8.9% in 2009. Nevertheless, BMI expects the impact of newbuild deliveries
to be less severe for the tanker sector than either the dry bulk or container sector. Firstly, the number of
idled tankers is currently significantly fewer than dry bulk carriers or containerships - research from
Lloyd's Maritime Intelligence Service estimates that approximately 3.8% of the crude oil tankers above
10,000dwt are currently inactive, compared with 9% of the total merchant shipping fleet.
Another key mitigating factor against the growing threat of overcapacity may be the projected increase in
the rate of vessel scrapping. Regulation passed by the International Maritime Organization (IMO)
requires tanker operators from member states to withdraw single-hulled carriers from operation by the
end of 2010, while vessels constructed with a double bottom and single sides are permitted to continue

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trading until 2015. While the vast majority of shipping lines have already converted their fleets to the new
design, 21% of the global tanker fleet is still estimated to be single-hulled. However, we caution that most
owners are unlikely to begin scrapping vessels while they are still able to operate ships at a profit,
however small, and valuations for single-hulled vessels still hover above their scrap value. As such, we do
not expect a significant increase in scrapping activity until Q210 at the earliest.
Cost Cutting
Shipping lines monitored by BMI across all sectors have introduced a number of cost-cutting measures
and the tanker market is no exception. We expect the main concern for ship-owners will be to reduce
expenditure and operating costs over the coming months as profit margins are squeezed by rising fuel
costs and low freight rates. In June Bermuda-based super-tanker operator Frontline was reported to be
operating at below its breakeven rate on some routes, according to Tanker World. Companies are able to
take steps to reduce their orderbooks through deferring and cancelling orders, and in May became the first
listed tanker operator to publicly announce newbuild cancellations, cutting a third of its orderbook with
the cancellation of four Suezmax and two VLCC vessels. Rival operator Teekay Corporation followed
suit, and in the company's Q1 financial results report released in July, said: 'We have reduced our
exposure to the spot tanker market by selling and chartering out a number of our spot vessels and
allowing our existing in-charters to expire. Significant progress has also been made on company-wide
initiatives to reduce overhead and vessel operating expenses, which combined with our rapidly declining
in-chartered fleet will reduce our cash flow breakeven levels.'
Waiting For A Recovery
Despite promising indicators of increased demand from some countries such as China, we caution that the
liquid bulk sector as a whole is likely to continue to face a tough operating environment in 2009 due to
rising fleet capacity combined with still-low global crude demand. As such, a stable recovery in freight
rates is unlikely to materialise until 2010 when growth in crude oil demand in the West begins to drive
demand for shipments and the rate of vessel scrapings increases in order to meet the IMO recycling
deadline. BMI is forecasting global crude oil demand growth of 1.9% in 2010 with demand in the OECD
region predicted to increase by 0.6% y-o-y. We expect the majority of liquid bulk operators to follow the
example of the industry leaders by keeping costs at a minimum, protecting operating margins, and waiting

for clear signs of a global economic recovery.

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Market Overview
Saigon New Port
Overview
Saigon New Port (SNP) is a modern port facility established in the 1960s to provide additional capacity to
the existing Port of Saigon. The port has expanded to become the largest port facility in South Vietnam,
accounting for more than 65% of port throughput in the Ho Chi Minh City area, and 42% of throughput in
Vietnam as a whole.
The port consists of three cargo terminals, as well as depot and customs points, situated at different
locations within the Mekong Delta area in the south-east part of Vietnam within an area measuring 60km
in circumference.
The port is operated by Saigon Newport Company (SNC).
Shipping
The port has limited deep-water berthing facilities as it is an inland port, not directly on the coast. The
ship-handling capabilities of the port vary between the various terminals. Tan Cang-Cat Lai terminal has
a berthing depth of 12m, allowing it to accommodate the Panamax series of vessels, while Tan Cang
terminal has a berthing depth of 11m. The newly constructed Tan Cang-Cai Mep terminal is Vietnam's
first deep-water container port facility, offering a berthing depth of 12.2m, and is able to accommodate
vessels with a maximum capacity of 80,000dwt. Tan Cang-Cai Mep offers the only direct container
services between Vietnam and North America, and features as a port of call on APL, MOL and Hanjin
Shipping's Asia-US routes.
Congestion

There have been recent reports of severe congestion and delays on waterways within the Ho Chi Minh
City metropolitan area, according to Cargo Systems, where the Tan Cang and Tan Cang-Cat Lai terminals
are located. Ships entering and leaving the port must compete for space with vessels heading to the Port
of Saigon as well as a number of smaller domestic ports. According to Reuters, Ho Chi Minh City
handled 72% of Vietnam's container throughput in 2007.
The Ministry of Transport has announced plans to invest US$4.5bn in the port infrastructure of Vietnam
by 2012. Within this framework are plans to re-locate a number of ports outside Ho Chi Minh City in
order to ease congestion on the city's waterways.

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