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Shipping industry faces troubled waters
A number of shipping companies in Vietnam are facing huge losses, some on the brink of bankruptcy, due to lack of clear development strategies.
The Vietnam Maritime Administration published a report about shipping development plan from 2013-2020, with view to 2030. The report said that Vietnam has rapidly grown the number of ships without proper management methods or plans to deal with sudden market changes.
The Baltic Dry Index (BDI) remains at 700 points, 11,793 points lower than 2008. Ship rental costs also sharply declined from USD72,970 to USD7,150 per day, per vessel of standard ship between 60,000 and 80,000 DWT.
In the meantime shipping companies wait for the situation to turn around. Many experts said that when the BDI reaches 3,000 points things will look better for the industry. For now, however, competition for domestic companies remains tough.
The report also pointed out several other shortcomings, such as old ships, or vessel types that are not in demand.
As of this year, about 40% of cargo ships were over 15 years old and do not meet international requirements for maritime safety, which Vietnam has agreed to through international conventions. More than 40 have actually been banned from maritime activities altogether.
The report went on to say, “We should focus on domestic transport and shorter routes. It is unrealistic to expect to create a fleet capable of 8.4-9.6 million DWT by 2015. It is also unreasonable to continue expanding our shipping fleet amid a market with declining demand.”
According to the Vietnam Maritime Administration, 40% tonnage of vessels will be cut down so that, by 2015, the total tonnage of the Vietnamese fleet will be reduced to 2.5 million DWT.
As of April, the number of ships was only 570 compared to last year, when it was 1,755. The Vietnam National Shipping Lines (Vinalines) decreased their fleet by 13.