Spotlight: Vietnam – Up and Coming Air and Ocean Cargo Shipping Hub

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• Vietnam’s economy has experienced rapid growth since the 1986 economic reforms and growth in international exports to Europe and the United States has accelerated in the past 5 years.
• Exports and imports have grown multi-fold and while there is a trade deficit, this gap is expected to narrow as export industries continue to grow.
• Containerized volumes have grown every year by almost 20%. However port and infrastructure improvements will need to continue to keep up with the growth trend.
• 24 of Vietnam’s 126 ports handle ocean cargo shipping however the country currently lacks deep water port facilities and can currently only handle small feeder ships. Development of deep-water ports are planned and should lead to large improvements in international cargo shipping activity.
• Vietnam’s logistic industry is still being developed and the country currently lacks in key infrastructure including warehousing and depot facilities to match with demand. Logistic costs can be a significant contributor to the high cost of doing business in Vietnam. Improvements over the past 10 years have brought down these costs significantly and these should continue to drop as Vietnam continues to invest in new infrastructure and technology to meet international shipping standards.
• Various companies (including companies in China) are now producing their commodities in Vietnam...the main question is can Vietnam handle the growing exports?

Ocean and Air Port Information:

Ho Chi Mihn city serves as the key port for both ocean and air imports and exports. More than 70% of Vietnam’s transport containers pass through this port.  Due to recent growth, congestion has become and will continue to be a problem as container volume growth exceeds port capacity expansion plans.

Alternate ports near Ho Chi Mihn are being developed as well as new international ports at Van Phong Bay (near Nha Trang) and Cai Lan in Quang Ninh providence.

Three international airports serving Hanoi, Danang and Ho Chi Mihn City handle international air cargo shipping. To meet the increased demand in passenger and freight traffic, the government has plans to develop an additional 3 international airports by 2015.

Key Products:

• Major exporter of seafood, rubber, rice and coffee
• Agricultural and aqua-products sector contributes to 30% of GDP

In Summary:

Vietnam has good potential to develop into a major air and ocean cargo shipping hub in Asia. As improvements are made to the ports, infrastructure and the logistics industry opportunities for shipping to and from Vietnam will continue to expand.

The Future of Your Business Could Be International Shipping

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Recently we have seen China come out and say that they will  "further reform the RMB exchange rate regime and enhance the RMB exchange rate flexibility"

We all know that CHINA has undervalued their currency for the greater part of the past decade where they have been the hub of manufacturing for all developed countries in the world. The Chinese government  has had the goal of their  export manufacturing being the engine for economic growth and job creation in China for the past 25 years. The strategy has largely worked, with China putting up better than 10% annual GDP growth for the past 30 years.  By announcing their plans to reform their fixed-rate system, China is finally signaling a willingness to allow supply and demand to determine the value of its currency.  They are following in the vision implemented by Deng Xiao Peng over 20 years ago when they opened up Shenzen and Guangzhou as their “experiment” with FREE ENTERPRISE.   Interesting that it came about the time the Berlin wall was coming down and the whole world had seen not only  that communism doesn’t work, it is a destructive force with Tsunami power in demolishing societies, as it tragically did with China from 1949 until the early ‘90’s when China started to wake up and smell the coffee brewing over in West.

So now if you walk down a major street in Shanghai, you will see at least 3 Starbucks within one block radius.  You first have to pass  a KFC, McDonalds and a few Malls the size of a small town (underground up to 5 floors high) and you would swear you were in Manhattan.

 Given China's trade surplus and all of that foreign investment cash  flowing into China, the consensus is that China's currency should appreciate quite a bit -- with some experts suggesting that their exchange rate will strengthen  to 4 or 5 RMB to the dollar rather than the current 6.8 RMB to the dollar , 25% increase, coming soon !!!

So if you are an average American that has a home filled with about 75% of goods made in China, or worse yet, your business is directly related to imports from China; Importer, Wholesaler, Logistics, Transportation, retail, etc, you have to see the writing on the wall that the U.S. dollar is only going to get weaker.   Besides the China factor, history has proven that recessions always follow with inflation.  

So money will continue to be tight, consumer costs will continue to rise, and let’s not forget about the hidden inflations ; TAXES,( thank you Democrats) ILLEGAL IMMIGRATION (Thank you Ted Kennedy ’64), INTEREST on our National debt, soon 40% of tax revenue to the U.S, Treasury will go towards servicing the debt, and who really pays for this ? (Thank you Progressive movement), the U.S. Bogus system of calculating actual inflation, cooked books (Thank you past Administrations going back 20 years) and then we have the brand new one courtesy of Mr. Obama, the HEALTH CARE BILL.  Health insurance will go up dramatically, forcing employers to pay more in premiums and taxes which will be passed on in the rising costs of goods and services to the public and further increased unemployment.

What we are left with in the coming decade is among other more dire circumstances, which I will not delve into, but one of great significance. That is the U.S. will have to become an economy dependent upon exports.  Not just of Cotton, Lumber, Scrap, waste paper, Agriculture, Rawhide, etc, but actual consumer manufactured goods.

Most people don’t realize that with all the ballyhoo about our trade deficit with China being so huge, is that the U.S. economy is still at least 4- 5 times larger than China’s and our exports still outnumber those of China.  It is mind boggling I know, but now that you see our dollar destined for another WEIMAR REPUBLIC, together with CHINA’s growing middle class (more than the population of the U.S.) with an RMB at 4 or 5 per USD, it doesn’t take a Rocket Scientist to deduce that China as well as other healthy economies (wherever they are) can afford to buy goods made in the Good old YOO ESS OF AYE.

So if you are wondering “ where is the future of my business”….now is a good time to seriously evaluate how manufacturing and exports can fit into the picture.

I would also like to add that it has become “In” and trendy in China to buy goods made in the USA now.  In fact the “Yuppies” of China are willing to pay higher prices for higher end merchandise and anything that reflects the American way of life.   The real truth is that people in China are in love with America and want to emulate our lifestyles.  This is the future. (that and our children better start learning mandarin)

5 Tips for 1st Time Cargo and Container Shipping Exporters

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When the driver shows up to your site, the first 2 hours are included in your fees. We recommend staffing up and preparing in advance to load the container as quickly as possible to avoid overtime charges.

Containers are subject to extreme conditions. There are wild swings in temperature and humidity inside the container - they go througth the Panama Canal and sometimes around the Cape. Containers are subjected to triple digit heat and humidity to sub-zero temperatures while in storage or in transport.

Plants, Edible Plants, Vegetables and Fruit are all treated differently depending on the origin and destination of the shipment. If customs finds any undeclared organic cargo, the can quarantine your container and charge you daily holding fees.

Plan for “attrition”. All of the contents don’t always make it all of the time.
There will be some "attrition" - containers get inspected, sometimes by unscrupulous dock/deck hands...this isn't REALLY considered stealing, as the items in transit, technically are the property of the shipping company.

Many companies and handlers are involved in moving your container, here are just a few possible examples: Trucking company(ies) outbound (your door to the port of origin or train yard), Crane Operations transferring container from truck to train, and train to ship. that's just to get the container to the ship, then the reverse happens on the other side...it's a REALLY rough ride, even in good weather.

By contracting with Universal Cargo Management, Inc. you directly benefit from the relationships and reputation for integrity that we have developed trusted relationships with our international shipping, air freight, ocean freight, and logistics service providers over the past 25-years. You benefit from our experience in keeping the freight forwarding process efficient an effective because we know the ropes as well, if not better than anyone.

Making sense of ocean freight and air freight rate fluctuations

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1) Rates are going up and staying up, not down

2) Space will be an issue probably all year

3) Expect “new” surcharges

• Lack of boxes adds to transpacific capacity squeeze, freight forwarders fear new surcharge
• Battle for Space on the Transpacific: Richard Owens, Asia Pacific CEO for DHL’s global customer solutions unit, told IFW that even “a company with DHL’s clout” was being forced to fight for space.

Making up lost shipping and ocean freight revenues

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Container Transport News: Furniture Exporting Gaining Momentum..

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Changes in demand for global freight logistics

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 ...Can an Importer from Shreveport, Louisiana Partner with an Exporter in Louisville, Kentucky?

Changes in demand for global freight logistics have opened new opportunities for collaboration. It doesn’t take an expert on global trade or economics to see that America is beginning to export more and import less. This is good news for American business, but does present some unprecedented challenges in moving goods overseas.

    “...carriers don’t like to move cargo inland as they want their containers in the ports to save the cost of repositioning.” - Devin Burke, CEO, Universal Cargo Management, Inc.

Although most of the growth in shipping traffic is still bulk items, such as scrap, produce, lumber, rawhide, cotton, etc, this country is growing in exports of such items such as used vehicles, construction equipment, as well as new manufactured goods such as building materials, medical equipment, sporting goods, high endfurniture. You couple that fact with the weak dollar, an Obama administration pushing to “double our nation’s exports in 5 years”, a growing middle class Chinese population developing an acquired taste for goods “made in America”, and other aggressive trade policies between America and countries like South Africa and Australia you would have to see there is a growing trend in exports. So what we are experiencing on the logistics side of exports are a steady increase in space and equipment shortages for anything being shipped out of America. Therefore if you are an exporter you not only face a space problem, where you may have to wait 3-6 weeks to get on board a vessel, depending upon the port,you are also experiencing shortages of actual equipment, especially in interior cities. So you may have to wait 2-3 weeks before equipment arrives before the carrier will accept booking.

On the import side, while there has been a decline in volume because of the decline in the American consumer’s buying power, retail decline, weak dollar, unemployment and other factors that severely slowed down the amount of cargo coming into this country from Asia in the past 2 years, there exists strangely enough since the 4th quarter of last year a severe space problem on ocean freight carriers from Asia, especially China.

The Big Disconnect: Import / Export Challenges
Now most of us all know the cause of this space problem to be manipulated by the carriers themselves when they decided to dock many of their vessels in ports like Singapore.(If you fly into Singapore you will see an ocean of between 6-700vessels sitting there empty, it’s quite a sight). This was done to “save” the lives of carriers because of the billions they lost last year (I heard Maersk lost $2 bill, wow, they supposedly have never lost money, ever, but who knows with creative accounting what the truth is, but still, wow). Well this capacity constraint actually worked for the carriers, as if you are an importer you will know the freight rate shave gone up from $700/40 from China to the west coast during the summer of’09, to now most importers are looking at paying around $2500/40 this summer. But even with the increase in revenue for the carriers, they are cleverly withholding their vessels in order to continue the space crunch, so they can maintain their high ocean freight rates for inbound freight to the USA.

The Federal Maritime Commission is investigating this matter and urges anyone wishing to participate in these hearings or offer information relevant to the development of the record in this proceeding to contact her office at (202) 523-5715.

So, What Are We Looking At?
We have a shortage of equipment for exports, and a shortage of space because of too many containers coming into America ? So why the disconnect ? One obvious answer is the fact the carriers don’t like to move cargo inland as they want their containers in the ports to save the cost of repositioning. However if an importer in say, Shreveport , Louisiana cannot get space for cargo coming from Shanghai and now has to pay freight somewhere in the range of $4500 or more (up about$1300-1500 from a year ago) uses a carrier like Maersk, or MSC that also has an exporter customer in a nearby town in Northern Louisiana of lumber, waste paper,or cotton who cannot get equipment and space for their exports for 3-4 weeks, why doesn’t MSC or Maersk put these two needs together to solve each others' problem? It would seem to me that either the people running these carriers are too shortsighted, or maybe the cargo moving out of this country is just too far away and costly to match with the destinations of imported cargo, I don’t know for sure, but I would bet on the former.

Bottom Line
In the past, carriers essentially subsidized the inland distribution of containers; now, with some homework on the part of American businesses, collaboration with May 22, 2010 to save container distribution costs can be leveraged in negotiating for space on outbound ships.Universal Cargo Management, Inc. has over 25 years experience assisting customers and partners in freight logistics internationally and domestically.