Vietnam's Port Industry - On the Path of Becoming a Bright Spot on the Global Logistics

In recent years, the port industry has emerged as a bright spot in the economic recovery trend, attracting substantial investment from various stakeholders. The year 2024 is forecasted to be promising for Vietnam's port sector, as the economy continues to recover and expand post-pandemic. With its advantageous geographical location and increasingly improved infrastructure standards, the port industry is positioned to play a crucial role not only in the supply chain but also as a driver of sustainable economic growth, benefiting not only Vietnam but also countries around the world.

The Role of the Port Industry in Vietnam

The port industry plays an essential role in driving Vietnam's economy, especially in the context of increasing international integration. Ports serve not only as gateways for trade but also as critical logistics hubs, connecting Vietnam to global markets. With its favorable geographical location, Vietnam boasts several major ports, facilitating the export of goods ranging from agricultural products to industrial outputs. This not only contributes to GDP growth but also enhances the value-added for exported goods, which is particularly significant as Vietnam is a net exporter.

Moreover, the industry is increasingly focusing on the adoption of new technologies to improve productivity and operational efficiency. Enhancing technological capabilities and implementing green solutions enable the port sector to minimize environmental impacts while boosting Vietnam's competitiveness in the international market.

Unexpected Benefits from the Global Context!

Building on the growth momentum of 2023, the international shipping market is expected to continue witnessing an increase in the number of new container ships from now until 2028. As of April 2024, over 1 million TEUs of vessels have been delivered, marking an 80% increase compared to the previous record, with 6.6 million TEUs of new orders, accounting for 25% of the total capacity of the global fleet. Among these, 44% are scheduled for delivery in 2024 (representing 11% of the current fleet capacity), 30% in 2025, 15% in 2026, and the remainder will be delivered in the 2027-2028 period.

The increase in the total capacity of the global shipping fleet directly positively impacts the demand for port services. Ports will need to expand and upgrade their infrastructure to accommodate larger vessels and more frequent port calls.

Figure 1. Number of new ship orders from H2/2022 to 2025 (Source: Statista)

At the beginning of 2023, a major shipping route through the Panama Canal faced serious disruptions due to drought conditions, which limited the number of vessels passing through the canal, prolonged waiting times, and increased shipping costs, resulting in a nearly one-third reduction in cargo volume along this route. Additionally, on the route through the Suez Canal, an attack in the Red Sea in April nearly paralyzed this shipping lane, directly leading to an increase in the length of the Asia-Europe shipping route, as vessels were forced to detour around the Cape of Good Hope, extending average transit times by an additional two weeks. The extended shipping routes, combined with rising cargo transportation demand due to an early peak shipping season and an increase in exports of electric vehicles, solar panels, and medical supplies—aimed at avoiding the impact of the U.S. tax increase on these items from domestic Chinese enterprises (effective from August 2024)—have led to significant congestion and overload at major ports. The global port congestion index reached 2 million TEUs, accounting for 6.8% of the total capacity of the global fleet. Among the most affected destinations is Singapore, where the average waiting time for a berth has reached 7 days, prompting many shipping lines to reroute their operations to other ports in the region, including those in Vietnam.

Resurgent Trade – A Necessary Boost for Breakthrough Growth:

Currently, global shipping rates are trending downward, making Vietnam's export market more attractive. Shipping costs are decreasing by an average of 3-4% per week, reflecting a stable downward trend that is expected to continue in the near future. Moreover, as we approach the end of the year and major holidays like Christmas and the Lunar New Year, consumer demand is anticipated to recover, prompting retailers to increase their inventory levels in preparation for heightened consumption.

Additionally, with the resurgence of the technology cycle, strong growth in attracting investment, and signs of increasing market demand, exports are projected to continue growing in the second half of 2024, particularly in key sectors such as textiles, electronics, and seafood.

Figure 2. Forecasting Export-Import Turnover and Growth

Regarding imports, in the first half of 2024, Vietnam's import trends from key markets have shown growth compared to the same period last year. Recently, there has been a significant increase in the import of raw materials, with the total value of this category estimated at $167.73 billion, accounting for 94% of the structure of imported goods in the first half of 2024. This indicates that businesses are ramping up preparations for the upcoming production surge, leading to continued high levels of export activity in the near future.

If the current growth trend in trade continues, it is entirely possible to expect that the total import and export value for the entire year of 2024 could exceed $800 billion.

Conclusion

Overall, the outlook for Vietnam's port industry in 2024 is relatively positive, supported by both the global context and domestic export potential. Additionally, the government has been making substantial investments in port infrastructure, facilitating improvements in cargo handling and processing capabilities. Furthermore, the increase in international trade, especially following the signing of free trade agreements, will significantly boost demand for port services among shipping companies. With these proactive measures, the port industry is expected not only to contribute to economic growth but also to play a crucial role in enhancing Vietnam's position on the global logistics map. (*)

(*) 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.