On the other side of Southeast Asia’s planning-for-the-future divide from Indonesia is Vietnam, which looks certain to have excess container handling capacity for some time to come. This discrepancy is almost entirely due to the opening of several new terminals at the deep-water port of Cai Mep in the last few years.
Planners envisioned Cai Mep as Vietnam’s bold statement of intent, a shiny new edifice to the country’s embrace of free trade and ability to meet the global shipping needs of the world’s manufacturers.
Nine investors, including various global port interests and shipping lines, secured concessions to build new terminals capable of handling the world’s largest container vessels. Five are operating, with APM Terminals, PSA and Hutchison Port Holdings among the operators.
Unfortunately, however, Cai Mep’s rows of gleaming gantries are vastly underutilized. The opening dates of more terminals to be operated by SSA Marine and CMA CGM have been delayed, or the projects put on hold.
Fierce competition for cargo has slashed charges, with some carriers and operators including free barge connections to attract more boxes. “There is significant overcapacity in Cai Mep which is obvious to all, and this has certainly created extreme competition, and rate levels and therefore investment returns well below that expected by port investors,” said Malcolm Gregory, head of commercial at APM Terminals’ Cai Mep International Terminal.
The reasons for Cai Mep’s excess capacity vary. A number of carriers have cut mainline services to Europe and the U.S. from Cai Mep as part of general service restructurings over the last year. Many shippers still prefer to use congested terminals at Ho Chi Minh City, where liner calls are more frequent. Others cite the cost of trucking containers to the port or the time lost when moving them by barge or the poor road from industrial estates near Ho Chi Minh City into Cai Mep.
CMIT receives three weekly calls that handle 750,000 to 800,000 20-foot equivalent units of volume. The terminal has a design capacity of 1.1 million TEUs.
Total weekly vessel calls at Cai Mep fell in late May to nine from 17 a year earlier, but had been lower earlier in the year, Gregory said. He attributed the decline “to issues within the shipping industry such as the retrenchment of CSAV services and the rejigging of vessel-sharing alliances rather than any issues with Cai Mep. Overall volumes in Cai Mep are not declining. there are simply fewer vessel calls with larger volumes on each call,” he said.
A spokesman for CMA CGM, which calls at Cai Mep with its FAL3 service on the Asia-Europe trade, said enlargement of a road link to the port would be completed later this year. This wouldn’t necessarily boost volumes, however, because most shippers preferred to use barge, he said.
He couldn’t confirm whether CMA CGM would proceed with building its terminal at the port but said the line was committed to using Cai Mep more in the future.
A spokeswoman at a major Asia-based line that offers direct services from Cai Mep to Europe and the U.S. admitted there were additional cost and time concerns involved for shipments via the port because shippers had to use either barge or truck to get shipments there. “Shippers still prefer to use Saigon (Ho Chi Minh) ports where the sailing frequency is higher and involves less cost,” she said. “Barge is cheaper than truck but takes a longer time. Road infrastructure … also at times cannot cope with the load.”
Stephen Ng, director of corporate planning at OOCL, agrees. “We see that barging is more viable in meeting most of our customers’ requirements,” he said. “Some of our cargo would go by truck for our door-to-door services but we believe that further road infrastructure support and expansion would help improve transportation efficiency and reach.” Three OOCL services call directly at Cai Mep, and the company is part of a Loop 1 service offered through the G6 Alliance.
Gregory, however, is optimistic demand will catch up with terminal capacity. He points to container volume growth in southern Vietnam of 9 percent last year and 14 percent in the first quarter of this year as cause for hope.
“We do see the situation improving as overall market growth in south Vietnam catches up with overall port capacity,” he said. “The terminals in Ho Chi Minh City are at, or over, capacity already.”