Patrick Lee reports how, amid the US-China trade war, Vietnam is now a focus of intra-Asia trade
The Intra-Asia container trade today is fueled by growth in emerging economies in South East Asia. Amid the US[ds_preview]-China trade war, Vietnam has benefited the most. As the US boycotts Chinese imports, its imports from Vietnam increased by nearly 35% in the first nine months of 2019.
There is no standardized definition for intra-Asia shipping. Services are not limited to routes within Asia, and may include long-haul services that include intra-Asia loops, and even ports in the Middle East, Australia and New Zealand. While vessels plying routes within South East Asia tend to be feeder-sized due to draught restrictions, the deployment of mega container ships on the Asia-Europe routes has resulted in the cascading of Panamax vessels to intra-Asia services that cover the Middle East, Australia and New Zealand. For example, the GALEX service run by Emirates Shipping Line and Regional Container Lines features eight ships that each have capacities ranging from 5,500 to 6,700TEU.
According to Alphaliner, the largest intra-Asia operators are Cosco Shipping subsidiary OOCL, Maersk’s Sealand Asia, Evergreen, CMA CGM subsidiary Cheng Lie Navigation (CNC Line), Taiwan’s Wan Hai, and China’s SITC.
US-China trade tensions have altered the flow of goods in Asia. According to China’s General Administration of Customs, the value of Chinese exports to South East Asia rose by nearly 60% year-on-year from January to October 2019, to 412.7bn.$, after the US levied a 10% tariff on Chinese exports a year ago. The value of Chinese exports to the US fell by 11%, to 347.8bn.$ during the same period.
In response, liner operators are adding more calls to South East Asia, especially Vietnam, which has seen an influx of foreign investors who want to bypass US tariffs on Chinese exports. In December 2019, through a cooperation with Singapore’s Pacific International Lines (PIL), Wan Hai Lines adjusted its China-Pacific Service I route to include Cai Mep Port, alongside Hai Phong. The service calls at Yantian, China, Hong Kong, as well as Oakland and Long Beach on the US West Coast.
Wan Hai told HANSA: »Vietnam has made up for the decrease in the volume of goods exported to the United States from China. We recognized this some time ago and thus invested in container terminals in Vietnamese ports, such as Cai Mep, Hai Phong and Da Nang.«
In 2019, citing »strong cargo volumes«, Taiwan’s second largest liner operator, Yang Ming Marine Transport, launched a China-Vietnam-Cambodia service.
Drewry’s senior manager for container research Simon Heaney told HANSA: »A combination of factors has seen shipping lines adding services to Vietnam, but the main driver is the US-China trade war. As US tariffs on Chinese imports have added to the costs of moving goods out of China, shippers have been looking for alternative manufacturing locations. If you look at how Vietnam-US trade, it has grown by 35% from a year ago, and Vietnam is now the fastest growing of the US’ trade partners.
»Intra-Asia is growing, it’s the biggest and most promising market right at our doorstep.«
Teo Siong Seng, PIL Managing Director
»Vietnam is a good alternative as it has a highly educated workforce and its port infrastructure has been improved. Vietnam is also dependent on imports of raw materials so it needs more intermediate goods from within Asia. Liners follow the cargo flows so where the cargo is, they will have to provide the services.«
PIL managing director Teo Siong Seng said at a recent conference that South East Asia is set for strong economic growth over the long term and container shipping can expect to gain from increased volume demand. He said: »Intra-Asia is definitely growing, and I always tell my colleagues that it’s the biggest and most promising market that is right at our doorstep. Asean is set to be the fourth largest market in the world by 2035, and not to forget that Asean has a population of 650 million and half of them are less than 20 years old,« he said. Teo added that shipments of consumer goods into Asia will continue to rise in the years to come.
Starting point in the 1950s
Intra-Asia container shipping has come a long way since its early days, which began in the 1950s with two-way or three-way services between Japan, South Korea and Taiwan, as these were the first Asian countries to industrialize. This changed when China joined the WTO in 2003. As China became the world’s factory, shipments of semi-finished products within Asia grew, fueling double-digit growth in intra-Asia container volumes.
European mainline operators decided that they too, had to get a slice of the intra-Asia pie. In 1993, AP Moller Maersk acquired East Asiatic Company, which was active in regional liner trades. The latter entity later became known as MCC Transport, which was recently rebranded as Sealand.
In 2007, CMA CGM acquired Taiwanese intra-Asia carrier CNC Line. In August 2019, three years after acquiring Neptune Orient Lines’ liner unit APL, CMA CGM integrated the latter’s intra-Asia operations into CNC Line.
CMA CGM explained: »As CNC will be the sole brand of the CMA CGM Group in Intra-Asia, we are now entering the next phase of merging our agency network which will be completed by the end of Q3 2019. The transition process includes alignment of all existing Intra-Asia Short Sea contracts with APL under the CNC platform and transferring of bookings solely under the CNC system as we move forward with one brand identity.«
With more carriers fighting for market share in the intra-Asia space, smaller carriers are consolidating or cooperating for survival. Especially in South Korea, where there are more than 10 companies doing intra-Asia shipping, the government has said that the market is oversaturated. This led to the formation of the Korea Shipping Partnership in 2017. In October 2019, the struggling Heung-A Shipping merged its container liner business with that of Sinokor Merchant Marine, forming a new entity, Heung-A Shipping Container.
Consolidation or not, intra-Asia carriers continue to add calls to Vietnam. In October 2019, Heung-A Shipping Container, began working with compatriot rival Dongjin Shipping to start a South Korea-Vietnam-Thailand service. Dongjin told HANSA: »We’re targeting major shippers in Pyeongtaek port. We’re seeing more demand to ship semi-finished goods to Vietnam, and consumer goods from Vietnam. That’s why so many carriers want to enter Vietnam – that’s where the cargo is now.«
Patrick Lee
