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

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

Including 5-year industry forecasts

© 2009 Business Monitor International All rights reserved.

All information, analysis, forecasts and data provided by Business Monitor International Ltd is for the exclusive use of subscribing persons or organisations (including those using the service on a trial basis) All such content is copyrighted in the name of Business Monitor International, and as such no part of this content may be reproduced, repackaged, copied or redistributed without the express

Business Monitor International

ISSN: 2040-9826

Report Q4 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: subs@businessmonitor.com Web: http://www.businessmonitor.com

© 2009 Business Monitor International

All rights reserved

All information contained in this publication is copyrighted in the name of Business Monitor International, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher

DISCLAIMER

All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the

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

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 NewPort 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

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 2013) 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

(2011-Vietnam's port recovery is reliant on a revival in (2011-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

SWOT Analysis

Vietnam Shipping SWOT

Strengths ƒ 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

ƒ 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 ƒ Vietnam's ports feature as ports of call on the Maersk Line, MOL, Hanjin Shipping

and APL services

Weaknesses ƒ 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 ƒ Vietnam's Ministry of Transport has plans to invest US$4.5bn in developing the country's port infrastructure by 2012

ƒ Recent port expansions have created direct shipping links with North America and are attracting major container lines to the country

ƒ A gradual recovery in Vietnam's trade volumes forecast to begin in 2010

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

Vietnam Political SWOT

Strengths ƒ 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

ƒ Relations with the US are generally improving, and Washington sees Hanoi as a potential geopolitical ally in South East Asia

Weaknesses ƒ Corruption among government officials poses a major threat to the legitimacy of the ruling Communist Party

ƒ There is increasing (albeit still limited) public dissatisfaction with the leadership's tight control over political dissent

Opportunities ƒ The government recognises the threat that corruption poses to its legitimacy, and has acted to clamp down on graft among party officials

ƒ 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 ƒ 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 ƒ 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

ƒ 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

Vietnam Economic SWOT

Strengths ƒ 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

ƒ 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 ƒ 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 ƒ 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 ƒ WTO membership has given Vietnam access to both foreign markets and capital, while making Vietnamese enterprises stronger through increased competition ƒ 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

ƒ 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 ƒ 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

ƒ Prolonged macroeconomic instability could prompt the authorities to put reforms on hold, as they struggle to stabilise the economy

Vietnam Business Environment SWOT

Strengths ƒ Vietnam has a large, skilled and low-cost workforce, that has made the country attractive to foreign investors

ƒ 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 ƒ 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 ƒ 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 ƒ Vietnam is increasingly attracting investment from key Asian economies, such as Japan, South Korea and Taiwan This offers the possibility of the transfer of high-tech skills and knowhow

ƒ 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 ƒ Ongoing trade disputes with the US, and the general threat of American protectionism, which will remain a concern

ƒ 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

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

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-to-back 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

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 Compañía 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

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 Europe BMI notes that the most recent route-sharing pacts for Europe services took place in June 2009, with Taiwan's Evergreen Line and the China Shipping

Asia-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

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

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

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

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

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

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

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

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

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 to 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

short-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

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

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

As container and tonnage volumes at the port have increased during the past decade, the problem of congestion has become more pronounced Tonnage throughput has increased from 5,589,000 tonnes in 2002 to 25,600,000 tonnes in 2007, an increase of 358% In 2008, the port handled 20.18mn tonnes of cargo, down 21% on the previous year Container throughput has also been rising steadily during the 2002-2007 period, increasing from 475,000TEUs in 2002 to 1,800,000TEUs in 2007 Year-on-year (y-o-y) growth has been high, increasing by 47.4% in 2003, 25.6% in 2004, 20.1% in 2005, 32.6% in 2006, and 28.6% in 2007 Growth slowed in 2008, when container volumes amounted to 2,018,104 (up 12.1%,

y-o-y) In January-April 2009 SNP handled 6.38mn tonnes of cargo, and BMI is expecting container and

tonnage throughput to experience a y-o-y contraction in 2009 as a result of the economic crisis, though throughput is expected to continue to increase thereafter

Terminals, Storage And Equipment

Tan Cang-Cat Lai terminal is the largest container terminal in Vietnam It is situated on the Nah Be River, 12km from Ho Chi Min City centre The terminal currently offers seven berths with a combined quay length of 1,189m and a berthing depth of 12m An additional berth is currently being constructed and is expected to be operational from 2010, bringing the total quay length to 1,462m The terminal has a capacity of 2.5mn TEUs per year

The Tan Cang-Cai Mep Terminal is Vietnam's first deep-water container terminal and was officially inaugurated in June 2009 The terminal is situated at the mouth of the Cai Mep River in Tan Thanh District, 60km south-east of Ho Chi Minh City Phase 1 (opened in June 2009) offers a 300m-long berth with a maximum depth of 12.2m alongside, able to accommodate vessels of up to 100,000dwt The terminal has 20 hectares container yard and the throughput capacity of 650,000TEUs per annum Tang

Cang-Cai Mep is a joint venture between Saigon New Port, Vietnam National Shipping Lines and PSA

Vietnam, a wholly owned subsidiary of PSA International, the Singapore-based port operator The

terminal currently features as a port of call on APL, MOL and Hanjin Shipping services

Expansions And Developments

A number of expansion projects are currently taking place to upgrade the port's infrastructure as part of a US$4.5bn national port investment plan, aimed at reducing congestion at Vietnam's busiest ports Under the proposals, a two-phase development of Tan Cang-Cai Mep terminal is taking place With the first phase completed in 2008, work on phase II is expected to terminate in November 2010 It will provide the facility with 600 additional metres of quay length, the ability to handle container ships of 110,000 dwt, and a 40 hectares container yard, capable to handle 1.1mn TEUs per annum, at a cost of US$153bn

Multi-Modal Links

SNP's terminals enjoy good connections with Vietnam's road networks Tan Cang-Cat Lai terminal is linked to National Highway 1 and the Inner and Outer Belt Highways The connection allows freight to be transported from the terminal to key surrounding industrial areas of Binh Duong, Dong Nai, Long An, Ba Ria-Vung Tau and provinces within the Cuu Long Delta Tan Cang-Cai Mep terminal is connected to surrounding areas by National Highway 51 Tan Cang terminal is located close to industrial areas in the Ho Chi Minh City metropolitan area and is linked to surrounding areas by National Highways 1 and 13 The terminal is located less than 10km from Ho Chi Minh City International Airport

Port of Da Nang

Overview

Da Nang Port is the largest sea port in the Central region of Vietnam The port is situated on the mouth of Han River (Da Nang), which flows into the South China Sea As well as profiting from coastal and interior shipping routes, its location marks it as an important spot on the East-West Economic Corridor, an economic corridor which links Vietnam, Burma, Thailand and Laos

The port is located within the natural harbour of Danang Bay, which measures 12km2 and has a depth of 10-17m It has a natural breakwater, allowing year-round vessel handling and anchorage The port is situated at a latitude of 16° 4' 56" north and a longitude of 108° 13' 37" east

Da Nang Port is split into two areas: Tien Sa terminal and Song Han terminal The port is primarily a general cargo handling facility, though it currently handles a small volume of container cargo The port is operated by the state controlled Port Authority of Danang (PAD)

Shipping

The port is able to receive ships with a maximum draught of 12m with a capacity of up to 45,000dwt at its Tien Sa terminal, allowing it to accommodate Panamax vessels, which have a design draught of 12m The terminal is also able to accommodate ro-ro vessels with a maximum capacity of 2,000TEUs Work is currently in progress to equip the terminal with an additional two berths which should have a berthing depth of 13-14m, which will allow it to accommodate the Post-Panamax series of vessel that is currently in development and will have a design draught of 13.6m

Terminals, Storage And Equipment

capacity of up to 45,000dwt as well as ro-ro and container ships with a capacity of 2,000TEUs Throughput capacity at the terminal is around 4.5mn tonnes per year

Song Han Terminal

Song Han is the smaller of the two terminals and offers five berths with a combined quay length of 528m The terminal has a berthing depth of 7m and is able to receive vessels with a capacity of 5,000dwt Throughput capacity at the terminal is more than 1mn tonnes per year

Storage

The port offers storage yards, measuring 183,772m2, and has a warehouse storage space of 29,204m2 These are split between three areas: Tien Sa terminal, Song Han terminal and Tho Quang freight warehouse station

Equipment

The port is equipped with two quay gantry cranes, two rubber-tyred gantry cranes, two Liebherr cranes and 23 mobile cranes with capacity of between 10 and 80 tonnes

Expansions And Developments

Da Nang Port Authority has announced its intention to invest US$70mn in expanding the port's facilities between 2007 and 2010 Major projects include the construction of two new berths with a quay length of 500m and a berthing depth of 13-14m at Ten Sa terminal The berths will include about 100,000 sq metres of yard and warehouse space The proposals also include the promotion of outside investment, aimed at funding the construction of a new terminal in the Tho Quang area of the port

Multi-Modal Links

Da Nang Port enjoys good links with nearby rail, road and air networks The port is located close to the Danang International Airport and Danang national railway station Danang city is linked to Vietnam's northern and Southern provinces by the national highway system

Industry Forecast

Recent port data released for one of Vietnam's main ports, the Saigon New Port, show an increase in

tonnage throughput for January-April 2009 of 43% in this period BMI has revised its forecasts to take

this data into account and estimates that in 2009 the Saigon New Port will cater for a total throughput tonnage of 19.1mn tonnes, down 5.15% on the port's throughput figure for 2008 We forecast that container volumes will decline by 4.76%, falling to 1.922mn TEUs

No 2009 throughput data is currently available for the port of Da Nang BMI therefore is sticking with its

prediction that the port will handle a total of 2.5mn tonnes in 2009, a y-o-y decrease of 8% Container volumes are also forecast to drop, with a decline of 24.75% predicted, bringing the yearly box throughput for 2009 to 46,568TEUs

BMI forecasts that a steady recovery at Vietnam's ports is set to begin in 2010 Saigon New Port's

tonnage throughput is set to increase by 5.73% to 20.2mn tonnes in 2010 Container throughput at the port is set to increase by 5.31% to 2.024mn TEUs We predict that over the mid term (2010-2013) total tonnage throughput at the port will increase on average by 7.6% per year This growth will enable the port to reach a throughput volume of 25.6mn tonnes in 2013

Container volumes at the port are also expected to increase in the mid term by an average of 7.1% per year This will allow the port to recover its pre-downturn box throughput volumes by 2010

BMI predicts that Da Nang's tonnage throughput is set to increase by 2.01% to 2.6mn tonnes in 2010

Container throughput at the port is set to increase by 5.48% to 49,119TEUs We predict that over the mid term (2010-2013) total tonnage throughput at the port will increase on average by 2.8% per year This growth will enable the port to reach a throughput volume of 2.8mn tonnes in 2013

Container volumes at the port are also expected to increase in the mid term by an average of 7.2% per year This, however, will not allow the port to recover its pre-downturn box throughput volumes during our forecast period

The main variable in BMI's port throughput forecasts is the country's import and exports In 2009 BMI

predicts that Vietnam's imports will decline by 15% with exports forecast to fall by 13% A gradual recovery is expected to begin in 2010 with total trade set to increase by 4.6% An average total trade growth of 6.6% is forecast over the rest of the mid term (2011-2013)

Vietnam's principal export commodities are crude oil and manufactured goods The country's main imports are machinery and equipment

Vietnam's main export partners are the US, Japan, Australia, China and Germany The country's main sources for imports are China, Singapore, Japan, South Korea and Thailand Vietnam's geographic position on the South China Sea allows the country access to the main transpacific and intra-Asian shipping routes, enabling the country to meet its trading needs

Table: Major Port Data

2007 2008e 2009f 2010f 2011f 2012f 2013f

Port of Ho Chi Minh City (Saigon New) throughput,

tonnes '000 25,600 20,180 19,140 20,236 21,887 23,712 25,616Port of Ho Chi Minh City

(Saigon New) throughput,

tonnes, % y-o-y 28.00 -21.17 -5.15 5.73 8.15 8.34 8.03Port of Ho Chi Minh City

(Saigon New) container

throughput, TEU 1,800,000 2,018,104 1,922,033 2,024,038 2,177,558 2,347,366 2,821Port of Ho Chi Minh City

(Saigon New) container

throughput, TEU, % y-o-y 28.57 12.12 -4.76 5.31 7.58 7.80 7.55

Port of Da Nang

throughput, tonnes '000 2,737 2,742 2,523 2,574 2,649 2,733 2,821Port of Da Nang

throughput, tonnes,

% y-o-y 15.43 0.19 -8.00 2.01 2.95 3.17 3.20Port of Da Nang

container throughput,

TEU 53,372 61,881 46,568 49,119 52,929 57,144 61,541Port of Da Nang

container throughput,

TEU, % y-o-y 42.69 15.94 -24.75 5.48 7.76 7.96 7.69

Source: VPA, BMI e/f = BMI estimates/forecasts Forecasts assume existence of spare capacity and the corrrespondence of national trade trends at local port level.

Table: Trade Overview

2007 2008 2009f 2010f 2011f 2012f 2013f

Imports, real growth, % y-o-y 27.45 9.96 -15.00 5.16 6.29 5.84 5.68Exports, real growth, % y-o-y 13.94 7.77 -13.00 3.86 6.79 7.84 7.68Total Trade, real growth, % y-o-y 20.82 8.95 -14.08 4.56 6.52 6.77 6.61

Imports, US$bn 64.2 83.0 73.2 78.1 88.6 103.0 120.2Import growth, % y-o-y 34.04 29.33 -11.86 6.66 13.49 16.29 16.67Exports, US$bn 54.65 69.50 62.51 65.89 75.12 88.94 105.65Export growth, % y-o-y 21.91 27.18 -10.05 5.41 14.00 18.40 18.79Total trade, US$bn 118.9 152.5 135.7 144.0 163.7 192.0 225.8Total trade growth, % y-o-y 28.17 28.34 -11.04 6.08 13.72 17.26 17.65

Source: National statistical authority, BMI e/f = BMI estimates/forecasts.

Table: Key Trade Indicators

2007e 2008e 2009f 2010f 2011f 2012f 2013f

Agricultural raw materials, imports,

US$mn 2,402 2,036 1,509 1,618 1,855 2,180 2,566Agricultural raw materials, imports,

% y-o-y 40.03 -15.26 -25.88 7.26 14.63 17.49 17.72Agricultural raw materials, exports,

US$mn 2,078 1,749 1,299 1,496 1,766 1,939 2,148Agricultural raw materials, exports,

% y-o-y 28.26 -15.82 -25.73 15.17 18.05 9.78 10.77

Ores and metals, exports, US$mn 265.9 196.8 156.2 183.2 210.3 221.8 235.7Ores and metals, exports, % y-o-y -2.89 -26.00 -20.63 17.34 14.78 5.47 6.27Ores and metals, imports, US$mn 1,830 1,362 1,082 1,167 1,350 1,601 1,900Ores and metals, imports, % y-o-y -2.25 -25.53 -20.58 7.84 15.70 18.60 18.66

Iron and steel, exports, US$mn 308.0 229.7 183.7 193.7 221.1 262.0 311.6Iron and steel, exports, % y-o-y -2.71 -25.44 -20.02 5.46 14.12 18.54 18.91Iron and steel, imports, US$mn 3,354 2,507 2,042 2,185 2,495 2,919 3,424

Table: Key Trade Indicators

2007e 2008e 2009f 2010f 2011f 2012f 2013f

Iron and steel, imports, % y-o-y -2.40 -25.25 -18.55 7.01 14.16 17.00 17.29

Manufactured goods, exports, US$mn 22,922 27,069 25,446 27,278 30,179 33,211 36,300Manufactured goods, exports, % y-o-y 12.59 18.09 -5.99 7.20 10.63 10.05 9.30Manufactured goods, imports, US$mn 38,388 47,587 43,346 46,029 51,379 58,250 66,126Manufactured goods, imports, % y-o-y 28.94 23.96 -8.91 6.19 11.62 13.37 13.52

Fuels, exports, US$mn 11,307 15,015 9,800 10,591 11,695 13,045 13,942Fuels, exports, % y-o-y 16.46 32.79 -34.73 8.07 10.42 11.55 6.88Fuels, imports, US$mn 8,606 11,680 7,619 8,272 9,374 10,787 12,153Fuels, imports, % y-o-y 28.47 35.71 -34.77 8.57 13.33 15.07 12.66

Source: UNCTAD, BMI e/f = BMI estimates/forecasts

Table: Main Import Partners

2002 2003 2004 2005 2006 2007 2008

Imports from China, P.R.,

Mainland (US$mn) 2158.84 3138.55 4595.10 5899.70 7391.30 12502.00 17592.90Imports from Singapore

(US$mn) 2533.49 2875.82 3618.40 4482.30 6273.90 7608.60 9617.87Imports from Japan

(US$mn) 2504.65 2982.06 3552.60 4074.10 4702.10 6177.70 8614.94Imports from Korea

(US$mn) 2279.60 2625.44 3359.40 3594.10 3908.40 5334.00 6089.65Imports from Thailand

(US$mn) 955.24 1282.19 1858.60 2374.10 3034.40 3737.20 5458.74

Source: IMF Direction of Trade Statistics.

Table: Main Export Partners

2002 2003 2004 2005 2006 2007 2008

Exports to United States

(US$mn) 2,453.15 3,939.56 5,024.80 5,924.00 7,845.10 10,089.10 12,594.10Exports to Japan

(US$mn) 2,436.96 2,908.60 3,542.10 4,340.30 5,240.10 6,069.80 8,264.30Exports to Australia

(US$mn) 1,328.33 1,420.86 1,884.70 2,722.80 3,744.70 3,556.90 4,466.29Exports to China, P.R.,

Mainland (US$mn) 1,518.33 1,883.12 2,899.10 3,228.10 3,242.80 3,356.70 4,174.25Exports to Germany

(US$mn) 729.03 854.71 1,064.70 1,085.50 1,445.30 1,855.10 2,714.70

Source: IMF Direction of Trade Statistics.

Company Profiles

SWOT Analysis Strengths

ƒ As the world's largest container shipping line, Maersk Line has a greater share of global seabourne container volumes than any other carrier

ƒ Its large, expanding fleet offers great capacity to capture trade volumes

ƒ Maersk Line is part of A.P Møller-Maersk, a diversified company, with activities in the oil and gas and terminal operating sectors that synergise with its shipping operations

over-Opportunities

ƒ The shipping sector has proved lucrative in the past two decades, with trade volumes growing on-year (y-o-y) since 1982 Although a downturn is inevitable in the short term, the mid- to long-term opportunity for trade growth is ever present, and Maersk is well positioned to capture these volumes

year-Threats

ƒ The company trades in kroner, which means that it is vulnerable to changes in the US$

ƒ Although the group operates in the oil and gas sector, disparities in the price of oil and bunker costs threaten profits

ƒ Should A.P Moller Maersk's CEO, Nil Smedegaard Andersen, pursue his pledge to move away from shipping, Maersk Line could be sidelined in favour of the group's oil and terminal operations

Overview

Maersk Line is part of the A.P Møller-Maersk Group - a highly diversified

group with major presence in the shipping sector The company was formed in 1904 in the Danish town of Svenborg and has since grown to become one of the most recognised shipping conglomerates in the industry The group employs around 110,000 people in 130 countries and also has activities in the oil and gas and retail sectors

Maersk Line is the world's largest container shipping line, according to data

from AXS-Alphaliner Its container liner divisions - Maersk Line, Maersk

Logistics, Safmarine - account for roughly 15% of the total global TEU capacity This equates to a capacity of 2,015,889TEUs, of which 1,900,000 units are operated by Maersk Line across a fleet of over 470 container

vessels The group has a terminal operating division, APM Terminals, which

operates over 50 terminals worldwide, including those at the Port of Tacoma and the Port of Los Angeles in the US, as well as the Port of Zeebrugge, Belgium and the Port of Mumbai, India

PERFORMANCE Q109

In May 2009, AP Moller Maersk announced its Q109 results and revealed a net loss of US$373mn The loss is in stark contrast to the firm's US$1,050mn net profit in Q108

Maersk Line recorded a year-on-year (y-o-y) fall of 14% in transport volumes in Q109 and this, coupled with the company offering freight rates that were 24% lower than in Q108, explains why Maersk Line's parent company is recording a loss

In Q109, APM Terminals (APMT) posted a y-o-y drop in container volumes of 12% The company's revenues fell by 8% to US$675mn and APMT's earnings (before tax, interest and other items) declined to US$131mn in Q109 The company expects a 'continued loss' in Q209, although it expects crude prices to improve slightly and says that the 'diminishing decline in freight volumes in the container trades is expected to reduce the decline in container freight rates' The company said it can not rule out a negative result for 2009 as a whole

2008 Full Year

In March 2009, AP Moller Maersk announced its 2008 full-year results The results were better than the company's forecasts, and were up on 2007's figures However, the Denmark-based company stated that it was cautious about 2009, as the current downturn is affecting all areas of its highly diversified business AP Mollar-Maersk's 2008 results were better than expected, with the group reporting a net profit of US$3.5bn, an increase of US$3.4bn on the 2007 figure and an improvement on the company's predictions, made on February 5 2009, that its profit for 2008 would be US$3.4bn

The yearly results of Maersk Line were impressive Profit after tax reached US$205mn in 2008, up on 2007's US$106mn This growth has been attributed to high freight rates in the first half of 2008

COMPANY ANALYSIS Container

As of July 7 2009, Maersk Line is the market leader on AXS Alphaliner's

rankings of the world's largest container fleets The company operates a fleet with a container capacity of 2.015mn TEUs and boasts a market share of 15% The company operates 538 vessels, of which 216 are owned and 322 are chartered (1.165mn TEUs owned and 850,451 TEUs chartered.) The company's chartered vessels account for 42.2% of Maersk Line's total fleet

The company has the world's largest orderbook in terms of vessels AXS

Alphaliner records that the company's orderbook currently stands at 70

vessels, 18.1% of Maersk Line's current fleet BMI notes that although Maersk

Line has the largest orderbook in terms of vessels, in terms of TEU capacity it

is ranked fourth after MSC, CMA CGM and COSCO Container Line We

believe the company's large fleet of small ships could be of benefit to the company, as it can place or remove ships from routes as demand requires, unlike other companies that have ordered larger container vessels and may have to face not being able to fill them, at least during the downturn, while trade levels are low and capacity levels are high

BMI warns that both the company's downturn strategy and the fact that the

company has smaller classes of vessels on its orderbook mean that the liner's

nearest competitor MSC is gaining ground According to AXS Alphaliner

Maersk Line's market share stands at 15% MSC is currently just 3.3% behind it with 11.3%

Terminals

APM Terminals (AMPT), AP Mollar Maersk's container operator, boasts operations in 34 countries The company's terminal portfolio of 50 terminals is diversified across all regions with 12 terminals in Europe, nine in the MEA, 17 in Asia, 11 in North America and three in Latin America

STRATEGY

BMI notes from its Q309 Maersk Line Overview that the company has initiated

all the main strategies on offer to container lines in order to weather the downturn in trade volumes The company has hiked rates, initiated route shares, laid up vessels, delayed some of its newbuild program and sent some of its ships round the Cape of Good Hope instead of the Suez, all in a bid to

trim costs BMI notes that over that last quarter Maersk Line has continued to

pursue a number of these cost-saving initiatives

Maersk Line has been a leading light in an industry-wide rate-hike strategy In June 2009 the company announced that it would increase rates on its Asia-Europe services for the second time in two months The company stated that rates on TEUs from Asia bound for European ports would increase by

US$250, with FEU rates increasing by US$500 Maersk Line also stated that a further increase, a peak-season surcharge, would come into effect from August 1 2009 and would stay in place until October 2009, with TEU rates hiked by another US$150 per TEU and an increase of US$300 per FEU

BMI notes that Maersk Line's rate hikes over the quarter have extended past

the major services and are also being applied to the company's other routes In June the company, as a member of the Asia-West Africa Trade Agreement (AWATA), announced rate hikes on its Asia-West Africa services Rates from Middle east and South Asia ports (excluding India) to west Africa increased by US$150 per TEU on July 1 2009 Rates on services from the Far East to West

Africa increased by US$300 per TEU on the same date Maersk Line plans a further rate increase of US$250 per TEU on its Far East to West Africa services from August 15 2009

Maersk Line's rate hikes have also extended to the company's intra-Asia routes with an increase of US$250 from July 15 2009 on the company's services from North East and South East Asia to New Zealand

BMI notes that rate hikes have been initiated industry wide as the container

shipping sector tries to raise rates to a sustainable level and keep them above operating costs after they plunged in the final quarter of 2008

Maersk Line's strategy of route sharing and decreasing the number of ships it operates, but at the same time offering its clients the same service, has continued over the quarter The company is working in co-operation with the French liner company CMA CGM on a number of route shares, and in June the companies' new Asia-US service pulled in at the Port of Seattle Maersk Line has also expanded its co-operation over the quarter, initiating a slot-charter agreement with NYK and MOL on its Asia-New Zealand service (NZ3) Despite launching a number of route shares, Maersk Line is also, despite the

downturn, launching some new services BMI notes that Maersk Line appears

to be extending its operations on Asia-Africa routes, launching a direct shipping service between Chinese ports and Nigeria in June 2009 In July the company launched its new M-Express, offering a link between Mozambique's Mapoto port to Maersk Line's main Asian transhipment hub, Tanjung Pelepas Over the quarter Maersk Lines' CEO, Eivind Kolding, and A.P Moller Maersk's CEO, Nil Smedegaard Andersen, have, in newspaper interviews, given a glimpse into Maersk Line's mid-term strategy In July 2009 Kolding told the

Financial Times Deutschland that he predicted a 'wave' of mergers in the

container line industry over the next few years and that Maersk Line would take part However, he stated that Maersk Line did not have any plans for takeovers in the near future, and is reported by the German newspaper as stating 'we are not planning to use the economic crisis to gain market share' This statement ties in with comments made by Maersk Line's parent

company's CEO, Nil Smedegaard Andersen, who in June 2009 indicated in an

interview with Danish newspaper Berlingske Tidende that A.P Moller Maersk

would move away from shipping, stating that 'Maersk Line has given bad yields Our focus will be oil and terminals, among others…our oil business and terminals continue to grow significantly faster than the market' In respect to Maersk Line's future, Andersen stated that the shipping group would not order any more ships, but would charter instead

RECENT ACTIVITY

ƒ In July 2009 Maersk Line announced changes to its Euromed service with the port of call Gioia Tauro removed from the southbound loop of the

service and placed on the north rotation The shipping line added the port of Haifa as a stopping point

ƒ In the same month Maersk Line's CEO, Eivind Kolding, stated in an interview that he believed that some shipping lines would not survive beyond 2010 unless they merged He stated that his company may take part in this

ƒ Also in July a Maersk vessel made its maiden call at the Shenzhen Da Chan Bay terminal on the company's Far East-Mideast (FM1) service ƒ In July Maersk Line launched its M-Express, offering links between the Mozambique port of Maputo on the Asian transhipment hub of Tanjung Pelepas

ƒ In June A.P Moller Maersk's CEO, Nil Smedegaard Andersen, stated that the shipping group would not order any more new vessels for Maersk Line and would charter vessels to make up numbers This decision is part of the company's long-term strategy to move away from shipping and into more oil and terminal operations

ƒ In the same month Maersk Line announced that a slot charter agreement had been reached with NYK and MOL on the Asia-New Zealand NZ3 service

ƒ Also in the same month the company announced that it planned to increase its intra-Asia container trades through its subsidiary feeder unit, the Singapore-based Mercantile Cargo Consolidators Transport

ƒ In June 2009 Maersk Line announced that it was ending its slot-exchange agreement on its AE-2 Far East-Europe route with Evergreen

ƒ In the same month the company announced that it planned to launch a direct service from Asia to Nigeria

ƒ In June 2009 Maersk Line announced that it would hike rates on its Europe services from July 1 2009 The company also stated that it would add a peak-season surcharge from August 1 2009

Asia-ƒ In the same month the company announced that it would raise rates on Asia-West Africa traffic

ƒ This announcement was followed by news of Maersk increasing operating charges on its Intra-Asia routes

ƒ In June Maersk Line's joint service with CMA CGM on a Asia-US route pulled in for the first time at the US port of Seattle

ƒ In the same month Maersk Line began calling at the UK port of Felixstowe on its AE1 (Asia-Europe) service

ƒ Also in June Maersk Line launched its Ecuador-Banana-Express

(ECUBEX)

ƒ In June 2009 the company announced that it planned to upgrade two of its Middle East-India-US East Coast services, the MECL1 and MECL2