2012-12-02 16:01:40 - New Transportation research report from Business Monitor International is now available from Fast Market Research
We do not envisage a strong pickup in Vietnamese exports due to growing evidence of a lacklustre recovery in global demand in 2013, which will have a knock-on effect on the country's freight industry. Additionally, Vietnam's main export partners, the US, China and Japan, are all finding it hard to shake off the economic hangover of 2012. That said, Vietnam's economy remains on track for a robust recovery in 2013, and we view consensus estimates on growth as being overly pessimistic. Also, looking at the breakdown of exports, we are seeing encouraging evidence that Vietnam is becoming less reliant on refined crude imports (dominantly petroleum imports) and could soon become a net exporter of crude oil over the coming years.
Report Details at
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By mode, the largest growth is set to occur in the maritime sector, with the country's biggest port, Ho Chi Minh City, set to enjoy year-on-year (y-o-y) growth of more than 7.50% in 2013. Air and road freight sectors will both see annual growth of more than 6% this year, while propping up the freight mix will be rail.
There are encouraging signs that China is seeking to strengthen ties with its Asian neighbours, providing a boost to infrastructure. The Yuxi-Mengzi railway line, which will start operating in Q412 and was funded by Chinese investment, will eventually run between the Yunnan province in China and Laos, Singapore, Thailand and Vietnam. Vietnam still suffers from a significant deficit in transportation infrastructure, and we believe the Vietnamese government will continue to develop this sector over the medium term.
Headline Industry Data
* 2013 rail freight tonnage is set to increase by 3.12% to 8.71mn tonnes.
* 2013 air freight tonnage is forecast to rise by 6.06% to 220,620 tonnes.
* Tonnage handled at the Port of Ho Chi Minh City in 2012 is forecast to grow 7.56% in 2013, whereas tonnage handled at the Port of Da Nang is forecast to increase 4.33%.
* 2013 road freight tonnage is forecast to grow by 6.85% to 713.01mn tonnes.
* 2013 total trade is forecast to rise by 5.70%.
Key Industry Trends
Vinalines' Woes Continue
We believe that Vietnam National Shipping Lines' (Vinalines) losses sustained in the first half of 2012 are largely due to the twin factors of corruption and financial mismanagement. Although the shipping sector has been hard hit by global economic headwinds in recent times, Vinalines' heavy exposure to Vietnam's domestic transport sector, which has been performing well recently, indicates that the company's struggles go beyond the troubles facing the global industry.
Dachser Builds Presence In Vietnam With Joint Venture
Dachser, a Germany-based logistics company, has taken another step towards expanding its operations in the Far East by creating a new Vietnamese operation, which has branch offices in Ho Chi Minh City and Hanoi, reported Handy Shipping Guide in October. The Hong Kong arm of Dachser, Dachser Far East, will be the major shareholder in the new joint venture with Dachser Vietnam to provide freight forwarding and logistics. The company currently operates in nine Asian countries.
Chinese Rail Investment Boosts Vietnam
Vietnam should benefit from the news that the 141km line from Yuxi to Mengzi, China, was completed on August 14, 2012, linking China to the Vietnamese border in the near future. The new route, which is primarily going to focus on rail freight, was funded jointly by the Chinese Ministry of Railways and Yunnan province at a cot of CNY4.5bn, with services expected to begin by the end of 2012.
Key Risks To Outlook
We note that the trend of interest from major freight companies in the intra-Asia market, first seen in the container shipping sector, is now picking up pace in the air cargo market. Air China Cargo, the freight subsidiary of Air China, is reportedly preparing to launch a cargo service linking China with Vietnam, the airline's second cargo venture into Asia in 2012.
According to Air China Cargo's chief operating officer, Titus Diu, the carrier is to launch an all-cargo service in Q312 linking Shanghai with Ho Chi Minh City in Vietnam via Singapore, followed by a direct flight back to Shanghai.
Although we expect Vietnam's economy to perform well over the short term - indeed, we are maintaining our view that real GDP growth will come in strong at 7.0% in 2013, and believe that signs of an improving economic outlook over the coming months will soon reignite bullish sentiment towards Vietnam's growth prospects - external factors do have a big bearing.
With the US by far and away Vietnam's largest export partner, the Asian country's fortunes are very much intertwined with the global superpower. It will come as a negative then that we maintain our 2.0% real GDP growth forecast for the US for 2012 and our 2.1% projection for 2013. The economy is running dangerously close to 'stall speed', by which we mean that any major unanticipated headwind would be enough to push the economy into recession. The knock-on effect on Vietnam's freight industry would therefore be detrimental, as demand slows.
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