Vietnam plans mega-port as Da Nang congestion builds

Vietnam plans mega-port as Da Nang congestion builds

A map of Da Nang showing where the new Lien Chieu terminal will be situated in the city.

Vietnam is planning a major new port facility to alleviate congestion at the Da Nang Port complex, the country’s third-largest port system, which is located in its central region.

A pre-feasibility study for the project at Lien Chieu, which at full build would cost around $1.48 billion, is under review by Da Nang city officials that want to solve capacity problems at the port’s busy Tien Sa terminals.

The study, prepared by port engineering consultants Tediport, who also worked on Cai Mep, details a construction project in three phases with the first phase costing $332 million and creating 1.87 million tonnes of capacity by 2020. Two additional construction phases, costing $353 million and $792 million, would take capacity to 17.53 million tonnes by 2030 and 46 million tonnes by 2050.

Da Nang is too far away from Ho Chi Minh City to easily take advantage of the capacity glut at container terminals around the southern city.

The existing Tien Sa terminal is already operating at maximum capacity, with shippers reporting delays as well as overloading at storage warehouses. A $49 million project was launched in July to raise the capacity of Tien Sa to 12 million tonnes of cargo and enable it to handle container ships with deadweight tonnage of 70,000.

Official figures show terminals at Da Nang Port handled a combined 146,000 twenty-foot-equivalent units in the first half of the year, a rise of 19 percent year-over-year. A record 6.5 million tonnes of cargo passed through the port in 2015.

The pre-feasibility study proposes that the new Lien Chieu project be developed on a public private partnership basis with funding from the Da Nang city budget, bank loans and overseas development assistance, or ODA. It is not clear which country would provide the ODA for the project.

One possibility is Japan because the Japanese government already invests heavily in Vietnam. Its agency for coordination of overseas aid, the Japan International Cooperation Agency, known as JICA, signed an agreement in April for the provision of more than $781 million for additional port and road infrastructure in the rapidly growing southeast Asian nation.

The loans are for the development of the deep-water port at Lach Huyen to the east of the northern city of Haiphong, the country’s third-largest, together with supporting hinterland road and bridge links. The port is scheduled to be operational by May of 2018, a delay of five months on the original project plan.

Vietnam’s northeastern coastal area, extending from Hai Phong and Ha Long City to Hanoi, is home to numerous Japanese and foreign-invested manufacturing facilities. The region’s seaborne trade is currently served by Hai Phong Port and Cai Lan Port.

As well as addressing increasing demand for containers in northern Vietnam, the new port would reinforce the international competitiveness of the entire northern region, JICA said.

Vietnam is expected to continue to lead Asia’s trade growth over the coming decades. IHS Markit forecasts it will book annual average growth in trade of around 7.8 percent up to 2035, compared with 6.1 percent for India and just over 4 percent for China. Average growth among Association of Southeast Asian Nations countries is also expected to be just over 4 percent.

 

Despite the strong outlook for trade growth, industry commentators have questioned whether sufficient cargo volumes will be available to justify the large infrastructure and port investment projects taking place in the country.

Contact Turloch Mooney at turloch.mooney@ihsmarkit.com and follow him on Twitter: @TurlochMooney.

A version of this story originally appeared on IHS Fairplay, a sister product of JOC.com within IHS Markit.