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Freight increases, but shipping firms still in distress   2012-03-21 - TBKTSG

The freight increases on the international shipping market would in no way help Vietnamese shipping firms escape from the current difficulties. Vietnam has its own fleet, but the shipping fee is decided by other powers.

Many enterprises in the status of “clinical death”

Do Xuan Quynh, Secretary General of the Vietnam Ship Owners’ Association, said that domestic shipping firms have worn out amid the expansion of foreign shipping firms in domestic and international routes.

All the maritime international conventions of which Vietnam is a member, including the Marpol 73/78 convention, require enterprises to make big investments in the maintenance, operation works in order to ensure the safety of the fleet. The conventions say that any ships entering the ports of the countries, that ratify the conventions, must obey the regulations, or will be fined.

The destinations of Vietnamese ships are mostly developed countries which all ratified the international conventions.

Meanwhile, on domestic routes, cargo, dry bulk, small tonnage ships have been taking loss because of the low freights and unstable goods supplies, while the fuel and maintenance costs have been increasing.

Quynh said that in reality, many shipping firms have been dead, but their death has not been declared, and they still exist on paper.

Selling ships to get money to hold out

Selling ships to cut down expenses and pay bank debts, and laying off workers to save money were the measures applied by many shipping firms in 2011. Vitranschart JSC, for example, liquidated three ships Phuong Dong 1, Phuong Dong 3 and VTC Star, from which it got the profit of 240 billion dong to cover the losses caused by high bank loan interest rates and the exchange rate fluctuations.

Vietnam now has 600 ships with the total capacity of 4.5 million DWT running on international routes. However, most of them carry goods for foreign firms, not Vietnamese goods, because Vietnamese enterprises deliver exports at Vietnamese ports and receive import goods also at Vietnamese goods.

“It is estimated that only 7-8 percent of Vietnamese imports and exports carried by the Vietnamese fleet.” Quynh said.

The Ship Owners’ Association has predicted that the shipping market would still be difficult in 2012 and 2013. Especially, the market segment of dry bulk goods – the most popular goods in Vietnam, would still be gloomier than in 2011.

Quynh said that only the big enterprises with healthy financial capability can “feed” their fleets to survive the current difficulties. He also said that the goal of domestic fleet handling 30 percent of the Vietnamese imports and exports may be unfeasible.

Since early March 2012, the shipping fees have been increasing sharply. The freight to the Middle East has increased by 500 dollars per TEU, to Europe by 700 dollars. Enterprises have been warned that the freight for shipping goods to Europe would rise further by another 400 dollars in April 2012, to the US by 300 dollars more.

The paradox is that Vietnam has its fleet, but the shipping freights are not decided by Vietnam. In fact, big financial speculators and big shipping agents all joined the freight auctions before, while big businesses book the ships six months or one year in advance. Therefore, they can have stable freights which allow them to set up business plan.

Meanwhile, Vietnamese enterprises cannot follow this way, because of the lack of capital. As a result, they have to pay higher shipping fees, depending on the market prices.

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