Southern port complex in a storm

According to the Ministry of Transport (MoT), the Japanese official development assistance (ODA)-funded Cai Mep-Thi Vai International Container Terminal will officially start commercial operations in six months after contractors completed the final installation of equipment. The $625 million terminal is among the largest terminals in the Cai Mep-Thi Vai port complex in southern Ba Ria-Vung Tau province.

The MoT trumpeted that the terminal would ease congestion at southern region ports. However, many port operators at this complex are in a perilous state and suffering losses. Port operators like Denmark’s APM Terminals BV, Singapore’s PSA International and the US’ SSA Marines which developed Cai Mep International Terminal, SP-PSA International Port and SP-SSA International Container Terminal, respectively, will have to share negligible amount of cargo with Nippon Yusen Kaisha, which gained the nod from the Vietnamese government to operate the new terminal.

Peter Smidt-Nielsen, general director of Maersk Vietnam and head of Port Sub-Group at the Vietnam Business Forum (VBF), a high-profile dialogue between the government and the private sector, said the Vietnamese government should “delay the planned opening of the ODA-funded Cai Mep-Thi Vai International Container Terminal until the market has stabilised and additional capacity is required.”

“With capacity now at twice the size of the market and with more new terminals under construction, it will take the industry between eight to 12 years to recover and become profitable.

Many terminal operators are thus at the brink of bankruptcy,” he said, adding that the exposure to the state budget was significant as the Vietnamese government, through Vinalines, was the major shareholder in these ventures.

The Cai Mep-Thi Vai port complex was touted to become an international transshipment port in the southern region to replace the Saigon Port complex. However, despite five terminals opening in 2009, cargo is still mostly handled by Saigon Port. In addition, the global economic downturn has severely hurt Vietnam’s shipping industry, forcing shipping lines to cut international direct lines to this port complex from 16 to nine lines.

The hunger for cargo has resulted in fierce competition between port operators in this complex, forcing them to reduce uploading and loading rates to attract vessels. The current rate is below $40 per 20-foot equivalent unit, while port operators said it should be ranging from $55-$60.

There are many reasons for shippers to keep on handling cargo in Ho Chi Minh City’s ports. The biggest reason is the slow pace of relocating ports in Ho Chi Minh City to the Cai Mep-Thi Vai complex. The slow pace of inland infrastructure linking terminals, such as the National Road 51 connecting Cai Mep-Thi Vai with other provinces like Dong Nai and Binh Duong, home to thousands of foreign-invested companies is also a factor.

To save port operators in the Cai Mep-Thi Vai complex, Nielsen said the Vietnamese government, apart from delaying the opening of the new terminal, should close the selected port facilities along Saigon River, including Saigon Port’s Nha Rong and Khanh Hoi terminals, Tan Thuan Dong port and Vegeport as soon as possible.

In a bid to resolve this dire situation, the Vietnamese government established a special team led by Deputy Prime Minister Hoang Trung Hai to resolve all obstacles delaying the relocation of ports in Ho Chi Minh City.