Maritime transport will be affected by rising costs due to fuel regulations

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From the beginning of 2020, all ocean carriers must comply with the regulations on minimizing sulfur in fuel from 3.5% to 0.5% to reduce emissions. In photo: Hai Phong Port. Photo: Internet

Growth is not as expected

According to Vietnam Maritime Administration, in the first quarter of 2019, Vietnam's seaports system received more than 128 million tons of goods, an increase of 7% compared to the same period in 2018, of which container cargo reached nearly 4.1 million TEUs. The above result is due to Vietnam’sincrease in import and export turnover. Specifically, in the first quarter, export turnover reached US$58.51 billion and import turnover reached nearly US$58 billion, up 4.7% and 8.9%, respectively, over the same period last year.

Forecastingcargo through seaports in the future, Mr. Trinh The Cuong, Head of the Maritime Transport and Service Department (Vietnam Maritime Bureau), said that the volume of goods transported through seaports in the near future will continue to maintain the growth rate as a series of large shipping lines such as Maersk and SITC willcontinuously open more service lines at seaports in Hai Phong, Da Nang and Cai Mep - ThiVai.

In Q1/2019, it recorded total revenue from production and business activities atnearly VND2,900 billion, while profit reached VND46 billion of Vietnam Maritime Corporation (Vinalines). In particular, the volume of sea transport is estimated to reach more than 5.2 million tons andthe output ofcontainers is about 74,000 TEUs. The port sector has a throughput volume of nearly 24 million tons (up 24% compared to the same period in 2018), volume of containers reached more than 1,150 TEUs(up 42.1% over the same period).

However, according to some maritime transport enterprises, revenue in the first quarter of 2019 was not as expected. Specifically, according to Mr. Nguyen Hanh Phuc, Head of Services and Import and Export of Tai Phat Cargo Services Co., Ltd., Q1/2019 profit of the Company is 25-30% lower than that of the first quarter of 2018. The main reason pointed out by Mr. Phucis that the number of ships of foreign transport enterprises has continuously increased in recent years. Along with that, the fact that foreign transport enterprises expanded more new flights in Asia also causeddomestic enterprises to face fiercer competition.

Worriesaboutincreasingcosts from 8-12%

“Most small transport businesses usually operate in intra-Asia routes, while foreign transport enterprises with large, heavy-duty fleets are much more competitive than Vietnamesetransport firms. It is very difficult for Vietnamese enterprises to compete on price. Therefore, besides the orders that we signed and made contracts from the end of 2018, we did not get any new orders for the first 5 months of this year. In the following months, we determined that we will cooperate with three more carriers to increase our flights to reduce costs, thereby creating more competitiveness for orders,” Mr. Nguyen Hanh Phucsaid.

Talking to reporters from Customs News, Ms. Bui Phuong Thao, Deputy Director in charge of Import and Export Department (ports), ThienHoa Forwarding Transport Service Trading Co., Ltd said in the coming months the company has determined that they will face many difficulties because according to the announcement of the InternationalMaritime Organization (IMO), from the beginning of 2020, all shipping companies must comply with the regulations on minimizing sulfur in fuel from 3.5% to 0.5% to reduce emissions. The compliance with this regulation will affect shipping rates, especially at the end of the year when the volume of import and export goods is higher.

“Some shipping lines have announced about adjustments of BAF fuel surcharges, in particular to increase from US$70-100/TEUson some routes, according to our calculations, this will increase shipping fees by 8-12%. So surely our revenue will also be affected. While supply is increasing, the number of foreign shipping lines is increasing. Notably, import and export goods are now designated by foreign partners, so the competition on the remaining orders is even fiercer,”said Ms. Phuong Thao.