Vietnam due for northern exposure
While container activity is focused in the South, the North could be primed for growth. But can it come soon enough?
By Eric Johnson
Considering that Vietnam is one of the last of the openly central governments in Asia, it's ironic that port development in the North of the country ' the region nearest to the capital, Hanoi ' has been anything but centralized.
A series of ports too small to be effective in the modern era of container movement sprouted but stagnated, putting the North effectively behind the 8-ball. That the lion's share of container movement occurs in the South of the country, around the economic hub of Ho Chi Minh City, is no accident.
But as with much of Vietnam, things are changing. Modern, international-class terminals are being built along the breadth of Vietnam's sinewy coastline, with significant terminal clusters expanding in the central (Van Phong and Da Nang) and northern (Haiphong) areas.
The container terminals in Haiphong are particularly worth examining because it's the closest port to Hanoi, which sits about 60 miles inland. Roughly 25 percent of the country's container volume moves through Haiphong and Cai Lan, a smaller port further north. That compares to the nearly 75 percent of container volume moving through ports near Ho Chi Minh City.
With a series of deepwater terminals just south of Ho Chi Minh City due to open over the next four years, that gap could spread wider, as carriers will be able to send larger volumes of containers through individual terminals than they can today.
Unless, of course, deepwater terminals can be developed in the North to match the productivity ' if not the total capacity ' of those coming up in the South.
The current terminals in Haiphong are all river ports. As with all other ports in Vietnam, only feeder services can call at Haiphong due to shallow draft. That restricts terminal capacity, as well as the type of ships that can call at any facility.
The newest of six terminals in Haiphong is the Dinh Vu container complex. The two-phase terminal already has been in operation since 2005, but APM Terminals last year signed a deal to develop a new modern container berth at the port.
Interestingly, the project is not listed on APM Terminals' Web site ' perhaps an indication that it is on the back burner for now as terminal operators cut back on expansion this year.
In any case, Dinh Vu is not the long-term answer for container movement through northern Vietnam. The terminal handled 131,200 TEUs in 2007 and that rose to 232,982 TEUs in 2008 as berths were added last year. But the existing berths at Dinh Vu handle general cargo and dry bulk as well as containers.
Haiphong as a whole handles about 15 percent of Vietnam's total container volume.
More capacity is coming from Cai Lan, the port just north of Haiphong. The expansion there, being jointly developed by Vietnam state-owned container line Vinalines and U.S.-based terminal operator SSA, is expected to open this year and have ultimate capacity of 700,000 TEUs. Though it's farther away from Hanoi, the draft at the newer berths would be 12 meters, compared to 8.5 meters in Haiphong's current terminals.
But for the fast-growing North, more capacity will surely be needed. Particularly dedicated container capacity. Which is where an ambitious project called Lach Huyen comes in. It's the proposed site of a deepwater terminal that would serve as a sort of counterweight to the extensive Vung Tau-Cai Mep port complex being developed south of Ho Chi Minh City (March American Shipper, pages 6-9).
More importantly, it would provide access to vessels of 6,000 to 8,000 TEUs in capacity. Currently, only vessels smaller than 1,000 TEUs can call at Haiphong. Even when the new APM Terminals berth at Dinh Vu opens, the largest ship it could accommodate would be about 1,600 TEUs.
Lach Huyen holds promise as a containerized goods outlet for the North, however funding is a proble. The project, headed by Vinalines, was first put forward a few years back, but at a cost of more than $1.5 billion, it has been slow to get off the ground.
Two factors make the North so compelling ' it's not as developed economically as the South, so the scope for rapid growth is much broader; and it sits much closer to China than Ho Chi Minh City, meaning the opportunities for cross-border trade with its neighbor are greater.
As international investment has poured into Vietnam, the North hasn't been overlooked. Canon and Taiwanese electronics manufacturer Foxconn have built sizable production plants in the North. More companies are expected to follow.
But the North's overall infrastructure is lacking. Roads are insufficient and freight rail all but nonexistent. There's a dearth of warehouses and inland container depots, as well as trucking options.
The Hanoi-based central government has gotten the message to a certain degree. Last year, work began on a $1.5 billion, six-lane expressway linking Hanoi with Haiphong, a critical connection as far as goods movement is concerned. Aside from sweeping through key northern production zones, the new expressway will also link to highways from southern China.
Long term, however, much will ride on the development of Lach Huyen. According to Vinalines, the port would eventually have 14 berths (with two berths coming online between 2010 and 2015), but projections for ultimate TEU capacity are hard to ascertain. Even harder to ascertain is when funding will come.
And the potential terminal sits farther out in the bay outside the city of Haiphong, meaning expensive road connections over water would be needed to link it to the Hanoi-Haiphong highway.
Lach Huyen and Vung Tau/Cai Mep aren't the only major port projects on the drawing board. A huge transshipment port in the southeastern coastal city of Van Phong is envisioned. The fanciful plans call for 36 to 42 berths capable of handling ships up to 12,000 TEUs.
Analysts have questioned whether, in the short term, Vietnam will generate enough cargo to draw line haul services from international carriers. With Vung Tau-Cai Mep due to open over the next three years, a huge transshipment port seems like a distant need. But the country's maritime bureau (Vinamarine) has prioritized Van Phong as one of its future port pillars, along with Vung Tau-Cai Mep and Lach Huyen.
Another port, Da Nang, in central Vietnam, could also blossom. It's seen as a key conduit for trade from northern Burma and Thailand, as well as landlocked Laos. The port's annual throughput is marginal ' far less than 100,000 TEUs ' but it could grow to be a key feeder outlet. Port officials said in December that they see Da Nang attracting 120,000 TEUs by 2010, and that terminal can handle ships of up to 2,000 TEUs. A berth expansion will see that rise to 3,000 TEUs by the end of next year.