VPS | The Future of Vietnam's Port Industry: Full of Promise!

In 2024, Vietnam's port industry is experiencing significant transformations, reflecting a dynamic economic development and increasing demand in international trade. With its favorable geographical location and an increasingly modern port system, Vietnam is not only attracting investment but also creating numerous opportunities for both domestic and international businesses.

Vietnam's Port Industry Continues Its Flourish

Production and Trade Activities

Domestic production has shown positive recovery signals since the beginning of the year. The Industrial Production Index (IIP) for August 2024 continues its upward trend, estimated to increase by 2.0% compared to the previous month and by 9.5% year-on-year. Meanwhile, the Purchasing Managers' Index (PMI) for August has remained above the 50-point mark since April 2024, reaching 52.4 points. Additionally, trade and investment activities have also increased compared to the previous month, providing strong momentum for logistics.

Export and import activities have also seen growth compared to the same period last year. From the beginning of the year until August 15, 2024:

• The total export value reached $244.4 billion, representing a 16% increase of $33.7 billion compared to the same period in 2023, with exports from foreign direct investment enterprises accounting for 78%. The items that saw increased export volumes compared to the same period last year include: coal of all types (+34%), plastic raw materials (+34%), tea (+30%), cashews (+25%), and iron and steel products (+20%). However, there was a decline in export volumes for certain items, such as ores and minerals (-15%), coffee (-12%), and rubber (-7%).

Figure 1. Export-Import Turnover of Vietnam

• The total import value reached $228.9 billion, representing an 18% increase compared to the same period in 2023, with imports from foreign direct investment enterprises accounting for 64%. The items that saw increased import volumes compared to the same period last year include: fertilizers (+53%), various types of coal (+35%), plastic raw materials (+24%), iron and steel products (+39%), other non-ferrous metals (+25%), and other ores and minerals (+23%). Conversely, there was a decrease in import volumes for certain items, such as petroleum products (-2%) and cashews (-1%).

Trade market potential

As of the end of July 2024, the United States remains Vietnam's largest export market, with a total value of $66.4 billion, while China is the largest import market for Vietnam, with a total turnover of $79.6 billion.

These positive signals in import and export activities are strongly driven by participation in free trade agreements (FTAs). Vietnam's involvement in the EU-Vietnam Free Trade Agreement (EVFTA), the Free Trade Agreement between Vietnam and the United Kingdom and Northern Ireland (UKVFTA), the Regional Comprehensive Economic Partnership (RCEP), and recent bilateral cooperation agreements with South Korea, the United States, and China has facilitated trade by reducing or even eliminating tariff barriers, making it easier for foreign businesses to access the Vietnamese market. This not only boosts exports but also encourages foreign companies to increase direct investment in the domestic market.

A promising future are awaiting…

From the second half of 2024 onward, the port industry is expected to witness many positive trends, with a rebound and sustainable development following the challenges posed by the pandemic. First, global cargo transportation demand is anticipated to continue rising due to robust economic recovery in major markets such as the U.S., Europe, and Asia. Forecasts suggest that cargo volumes through ports will increase by approximately 5-7% annually, creating opportunities for ports to expand and upgrade their infrastructure.

Despite regional conflicts and geopolitical tensions, the WTO projects that international trade growth will gradually improve in 2024. Over the past six months, the EU economy has shown signs of recovery, with inflation in the region beginning to ease, low unemployment rates, and substantial growth in the minimum wage in Q2 2024, leading to increased income for consumers. This positively impacts consumer demand in the region, facilitating opportunities for exporting businesses, including those from Vietnam.

These factors indicate that the port industry is on a strong growth trajectory, promising numerous opportunities for businesses and the global economy in the forthcoming period. The combination of enhanced technology to improve port capabilities and increased demand for goods, grounded in international cooperation, will undoubtedly shape the future of the port industry in the coming years.

Potential Corporations:

Gemadept Corporation (HSX: GMD)

• Q2 2024 Revenue: Gemadept reported revenue of VND 1,150.9 billion in Q2 2024, representing a 26.17% increase year-on-year. Gross profit margin increased by 11.12% year-on-year, reaching VND 510.52 billion; however, the growth was uneven due to the cost of goods sold rising by 41.44% in Q2 2024.
• Joint Venture Earnings: In Q2 2024 and the first half of 2024, GMD recorded a substantial increase in earnings from its joint ventures, tripling compared to the same period last year. This significant contribution primarily came from the strong business performance of Gemalink (GML), driven by: (1) A recovery in container volume, with total container throughput reaching 2 million TEUs, a 50% increase year-on-year in the first half of 2024 (with container volumes at GML doubling year-on-year); (2) Leveraging its scale, location, and the ability to service ships up to 240,000 DWT, Gemalink was able to raise service prices due to Circular 39.
• Future Plans and Investments: Gemadept plans to utilize VND 1.5 trillion raised from an upcoming rights issue to acquire three additional vessels and seven barges, expanding its current fleet of four vessels and 45 barges. The logistics segment of GMD is expected to strengthen, with revenue growth projected to reach up to 10% in the upcoming period.
• Long-term Growth Drivers: The expansion of GML with phases 2A and 2B is seen as a long-term growth driver for GMD. Once both phases are completed by 2028, GML's total capacity is expected to double from the current level, reaching 3 million TEUs.

Vietnam Container Corporation (HSX: VSC)

• Q2 2024 Revenue: VSC reported revenue of VND 717.54 billion in Q2 2024, representing a 35.16% increase year-on-year. Net profit after tax reached VND 91.54 billion, showing an impressive growth of over 2.5 times.
• Asset Growth: Total assets increased by 26.22%, reaching VND 6,488.63 billion, with a safe short-term liquidity ratio of 0.09.
• Mid-term Growth Drivers: Mid-term growth is driven by VSC's increased ownership of Nam Hai Dinh Vu Port to 100%. The total throughput at this port is expected to reach 1.19 million TEUs in 2024, nearing its maximum capacity, due to: (1) Leveraging cargo from Green Vip Port; (2) Expanding new service routes; (3) Holding a competitive position at the downstream of Cam River; (4) Collaborating with Evergreen shipping lines to ensure a stable supply.
• Upcoming Investments: Following the successful divestment of over VND 800 billion from Hyatt Hai Phong Hotel and the complete divestment of VND 88 billion from Dinh Vu Petroleum Services Port Joint Stock Company (PTSC), VSC is set to generate over VND 900 billion. This capital will be utilized for expanding operations and enhancing port service capacities, thereby strengthening the company's competitive position.

(*) Disclaimer: This report is intended to provide information for investors' reference only. The views, forecasts, and estimates in this report reflect the author's opinions at the time of publication and are subject to change without notice. Investors should independently assess the information in this report.