BMI Vietnam Shipping Report Q2 2014

Q2 2014www.businessmonitor.com

VIETNAMSHIPPING REPORTINCLUDES 5-YEAR FORECASTS TO 2018

ISSN 2040-9834Published by:Business Monitor International

Vietnam Shipping Report Q2 2014INCLUDES 5-YEAR FORECASTS TO 2018

Part of BMIs Industry Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: January 2014

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CONTENTS

BMI Industry View ............................................................................................................... 7

SWOT .................................................................................................................................. 10Shipping ................................................................................................................................................ 10Political ................................................................................................................................................. 13Economic ............................................................................................................................................... 14Business Environment .............................................................................................................................. 15

Industry Forecast .............................................................................................................. 16Port Of Ho Chi Minh City Throughput ......................................................................................................... 16

Table: Major Port Data, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Table: Trade Overview, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Table: Key Trade Indicators, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Table: Top Import Partners, 2004-2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Table: Top Export Destinations, 2004-2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Market Overview ............................................................................................................... 24Vietnam Container Shipping Market Overview .............................................................................................. 24

Industry Trends And Developments ................................................................................ 32

Company Profile ................................................................................................................ 35Vietnam Petroleum Transport Company (VIPCO) .......................................................................................... 35Vietnam National Shipping Lines (Vinalines) ................................................................................................ 37

Shipping - Global Industry View ....................................................................................... 41Container Demand: Growth Outlook To Bolster 2014 Box Volumes .................................................................. 41Container Supply: Overcapacity To Remain An Issue In 2014 .......................................................................... 51Container Rates: Volatile As Demand Ticks Up, But Oversupply Remains .......................................................... 60

Table: Shipping Lines' Agents Offices Raided In Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Global Company Strategy ................................................................................................. 68Maersk Line ........................................................................................................................................... 68Mediterranean Shipping Company .............................................................................................................. 78CMA CGM ............................................................................................................................................. 84Evergreen Line ........................................................................................................................................ 92COSCO Container Lines Company ............................................................................................................. 99

Macroeconomic Forecasts ............................................................................................. 106Table: Vietnam - Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

Demographic Forecast ................................................................................................... 110Demographic Outlook ............................................................................................................................ 110

Vietnam Shipping Report Q2 2014

Business Monitor International Page 4

Table: Vietnam's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111Table: Vietnam's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112Table: Vietnam's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113Table: Vietnam's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113



BMI Industry View

BMI View: Although we expect the Vietnamese economy to record yet another quarter of sub-par growth inQ4 2013, we are beginning to see potential for upside surprises to domestic demand over the comingquarters. Recent data on foreign direct investment inflows, remittances, passenger car sales, and propertymarket launches, suggest to us that domestic demand is on a nascent recovery, setting the stage for stronger2014 growth and with it, providing a boon for the country's shipping sector.

The general consensus is expecting the Vietnamese economy to suffer yet another quarter of sub-par growth

mainly due to subdued external demand and the lack of progress on banking sector reforms. This is closely

in line with our view that real GDP growth will come in at just 5.3% in 2013, a slight improvement from5.2% in 2012. Looking ahead to 2014, however, evidence of improving macroeconomic fundamentals in

Vietnam (especially with regards to the outlook for domestic demand) suggests to us the balance of risks toour growth forecast of 6.0% is gradually tilting towards the upside.

The Port of Ho Chi Minh City remains by far and away Vietnam's outperformer in terms of total tonnage

throughput (41.22mn tonnes anticipated by the end of 2014), but it is the Port of Da Nang that will see thelargest year-on-year (y-o-y) growth this year (7.00% compared with a forecast 6.06% at Ho Chi Minh City).These forecasts remain unchanged from last quarter.

Headline Industry Data

2014 tonnage throughput at the Port of Ho Chi Minh City is forecast to grow 6.06% to 41.22mn tonnes.

2014 tonnage throughput at the Port of Da Nang is forecast to increase 7.00% to 5.15mn tonnes.

2014 container throughput at the Port of Ho Chi Minh City is forecast to rise 10.0% to 4.22mn twenty-foot equivalent units (TEUs).

2014 container throughput at the Port of Da Nang is forecast to increase 9.43% to 173,000TEUs.

2014 total trade real growth is forecast to increase 6.55%.



Key Industry Trends

Evergreen-Hanjin's Intra-Asia Tie-Up Highlights Vietnam Growth Story: The newly established intra-Asia service by Taiwan-based Evergreen Line and South Korea-based Hanjin Shipping, which calls at theport of Ho Chi Minh, will boost both companies' intra-Asia operations. We have long highlighted intra-Asia

trade as a region of strong growth and we note the port of Ho Chi Minh to be a specific beneficiary of the

new route - with the launch of the service offering upside risk to our forecast for the port.

Vietnam Set For Belgian Link-Up: Vietnam is set to make full use of Belgian expertise in the shipping

sector going forward after a collaboration agreement signed by the ports of Antwerp (the second largest portin Europe) and Zeebrugge, Rent-A-Port and Saigon Newport relating to the construction of a new bulkterminal in the port of Lach Huyen in the north of the country was announced in December 2013.

TSL, ASL Launch Second Service To Haiphong: Hong Kong's TS Lines (TSL) is poised to launch itssecond service, HHX 2, to Haiphong in Vietnam, which will be in collaboration with Hong Kong-based

Asean Seas Line (ASL), will double the calls at the port of Haiphong. TSL is expected to provide one 700twenty-foot equivalent unit (TEU) vessel to replace a 340TEU vessel. ASL will provide the second 700TEUvessel to operate the service. Apart from this, TSL has joined its Hong Kong-Haiphong shuttle and its JTKservice, which calls at ports in Japan, Taiwan, Korea and South China.

Key Risks To Outlook

Plans are afoot by the Vietnamese Ministry of Transport (MOT) to rethink the port system in the south ofthe country in order to maximise output from those ports, it was announced in November 2013. The move

comes after warnings by the Japan International Cooperation Agency (JICA) that the Cai Mep-Thi Vai portcomplex must be ready to make changes to its operations or face the threat of operating ineffectively by

2015, according to reports by VietNamNet Bridge.

In response to the report by the JICA, Nguyen Van Cong, Deputy Minister of Transport, explained that the

MOT would seek to put in place measures recommended by the Agency, one of which relates to the

suggestion that it is too expensive to send goods through the Cai Mep-Thi Vai complex, compared to other

ports in Ho Chi Minh City. However, this scenario may mean that ports in the Vietnamese capital will be

dogged by oversupply in a couple of years' time.



Meanwhile, Maersk were waxing lyrical about the prospects that Vietnam offer at the end of 2013 in

relation to the signing of a trade agreement between the country and various other countries including the

US, Australia, Japan and Singapore. Speaking to VIR, Maersk Line Vietnam and Cambodia CEO Nguyen

Thi Ngoc Bich said: 'The country continues to be an attractive sourcing destination with competitive

advantages in low labour costs, a strategic geographical location, strong deep water port infrastructure,

leading positions in agricultural exports, high GDP growth, long term political stability, and a government

committed to enhancing economic stability and development.'

With the aim to liberalise Asia-Pacific economies further, the other countries involved in the trade

negotiations include Brunei, Chile, Canada, Malaysia, Mexico, New Zealand, and Peru.



SWOTShipping

Vietnam Shipping Industry SWOT Analysis

Strengths Vietnam's location by the South China Sea gives the country access to the main inter-

Asian shipping routes, allowing it to meet its trading needs.

Vietnamese facilities feature as ports of call on Maersk Line, MOL, Hanjin Shipping

and APL services.

Weaknesses Significant outside investment is required for the country to match expected export

growth over the next few years, despite a surge in state investment led by a US

$4.5bn government port investment programme.

Decades of underinvestment have left Vietnam with a port infrastructure system

ranked 97th out of 139 countries by the World Economic Forum's Global

Competitiveness Report.

Overcapacity is a looming spectre over the country's shipping sector and is an issue

that must be addressed.

Following three years of delays and due to state overseers failing to raise US$3.6bn in

foreign and national investment, the construction of Van Phong International

Transhipment Port was halted at the behest of the Vietnamese Transport Ministry.

The decision to shelve the planned port - originally proposed to be completed by

2020 - was undertaken by the Vietnamese Deputy Prime Minister, Hoang Trung Hai

and was made public in September 2012.

In mid-April 2013, Drewry Maritime Research reported that there are continuing

problems with under-capacity (four of six berths currently have no major customers)

at the new container terminals in Cai Mep-Thi Vai. Port statistics show that growth is

falling below expectations, highlighting the fact that poor Vietnamese infrastructure in

the port sphere is impacting on its bid to secure China production.

Vietnam Shipbuilding Industry Group (Vinashin) is set to lay off up to 14,000

employees as part of its restructuring process, it was announced at the end of 2013.



Vietnam Shipping Industry SWOT Analysis - Continued

The restructuring initiative follows years of trouble for the company, which was

established in 2005 after the merger of 200-odd shipping companies.

Opportunities There is growing international interest in Vietnam as a growth market within the box

shipping sector, catering for rising exports of manufactured goods to Western

markets.

The steady recovery in Vietnam's trade volumes from the 2009 downturn is set to

continue.

Vietnam and France entered into an economic dialogue in April 2013 in Hanoi to

discuss the strengthening of bilateral economic ties, especially in trade and

investment.

The US$1.2bn, 900,000TEU deepwater Lach Huyen Terminal in Haiphong (a joint

venture between Vietnam's Vinalines and Japan's Mitusi OSK Lines, Nippon Yusen

Kaisha and Itochu) became the first public-private project in Vietnam in April 2013.

It is in the container shipping sector that Vietnam has seen the most development - a

trend which is expected to continue. As Vietnam has become the factory of Asia, with

an emphasis on the development of clothing and shoe exports, the country's ports

and shipping links have had to keep up.

Construction of a new port began in April 2013, with the Lach Huyen Terminal project

offering upside risk to the Vietnamese shipping sector. The deepwater Lach Huyen

terminal in Haiphong is a US$1.2bn joint venture, which comprises Vietnam's

Vinalines and Japan's Mitusi OSK Lines, Nippon Yusen Kaisha and Itochu.

The inefficiencies in the Vietnamese port sector were adding to both higher costs for

shippers and lower levels of productivity, explained Fox Chu of consulting firm

Accenture at the end of July 2013, and he declared that improvements in

communication and co-operation in the sector could spur the establishment of

partnerships and privatisation, paving the way for foreign intervention and expertise.

Threats The South China Sea territorial dispute with China, combined with widespread anti-

Chinese sentiment in Vietnam, is a significant political risk factor to bilateral trade and

investment.



Vietnam Shipping Industry SWOT Analysis - Continued

Some of the new ports built in the country are currently under-utilised and a change

of strategy is needed to encourage growth.

The malaise afflicting the Vietnamese shipping sector has manifest itself in the

summer of 2013 with a fairly high profile casualty as it was announced that SP-SSA

International Container Terminal has temporarily suspended operations at its terminal

at Cai Mep-Thi Vai Port complex.



Political

SWOT Analysis

Strengths The Communist Party of Vietnam remains committed to market-oriented reforms and

we do not expect major shifts in policy direction over the next five years. The one-

party system is generally conducive to short-term political stability.

Relations with the US have witnessed a marked improvement, and Washington sees

Hanoi as a potential geopolitical ally in South East Asia.

Weaknesses Corruption among government officials poses a major threat to the legitimacy of the

ruling Communist Party.

There is increasing (albeit still limited) public dissatisfaction with the leadership's tight

control over political dissent.

Opportunities The government recognises the threat corruption poses to its legitimacy, and has

acted to clamp down on graft among party officials.

Vietnam has allowed legislators to become more vocal in criticising government

policies. This is opening up opportunities for more checks and balances within the

one-party system.

Threats Macroeconomic instabilities continue to weigh on public acceptance of the one-party

system, and street demonstrations to protest economic conditions could develop into

a full-on challenge of undemocractic rule.

Although strong domestic control will ensure little change to Vietnam's political scene

in the next few years, over the longer term, the one-party-state will probably be

unsustainable.

Relations with China have deteriorated over recent years due to Beijing's more

assertive stance over disputed islands in the South China Sea and domestic criticism

of a large Chinese investment into a bauxite mining project in the central highlands,

which could potentially cause wide-scale environmental damage.



Economic

SWOT Analysis

Strengths Vietnam has been one of the fastest-growing economies in Asia in recent years, with

GDP growth averaging 7.1% annually between 2000 and 2012.

The economic boom has lifted many Vietnamese out of poverty, with the official

poverty rate in the country falling from 58% in 1993 to 20.7% in 2012.

Weaknesses Vietnam still suffers from substantial trade and fiscal deficits, leaving the economy

vulnerable to global economic uncertainties. The fiscal deficit is dominated by

substantial spending on social subsidies that could be difficult to withdraw.

The heavily-managed and weak currency reduces incentives to improve quality of

exports, and also keeps import costs high, contributing to inflationary pressures.

Opportunities WTO membership and the upcoming ASEAN AEC in 2015 should give Vietnam

greater access to both foreign markets and capital, while making Vietnamese

enterprises stronger through increased competition.

The government will in spite of the current macroeconomic woes, continue to move

forward with market reforms, including privatisation of state-owned enterprises, and

liberalising the banking sector.

Urbanisation will continue to be a long-term growth driver. The UN forecasts the

urban population rising from 29% of the population to more than 50% by the early

2040s.

Threats Inflation and deficit concerns have caused some investors to re-assess their hitherto

upbeat view of Vietnam. If the government focuses too much on stimulating growth

and fails to root out inflationary pressure, it risks prolonging macroeconomic

instability, which could lead to a potential crisis.

Prolonged macroeconomic instability could prompt the authorities to put reforms on

hold as they struggle to stabilise the economy.



Business Environment

SWOT Analysis

Strengths Vietnam has a large, skilled and low-cost workforce, which has made the country

attractive to foreign investors.

Vietnam's location - its proximity to China and South East Asia, and its good sea links

- makes it a good base for foreign companies to export to the rest of Asia, and

beyond.

Weaknesses Vietnam's infrastructure is still weak. Roads, railways and ports are inadequate to

cope with the country's economic growth and links with the outside world.

Vietnam remains one of the world's most corrupt countries. According to

Transparency International's 2012 Corruption Perceptions Index, Vietnam ranks 123

out of 176 countries.

Opportunities Vietnam is increasingly attracting investment from key Asian economies, such as

Japan, South Korea and Taiwan. This offers the possibility of the transfer of high-tech

skills and know-how.

Vietnam is pressing ahead with the privatisation of state-owned enterprises and the

liberalisation of the banking sector. This should offer foreign investors new entry

points.

Threats Ongoing trade disputes with the US, and the general threat of American

protectionism, which will remain a concern.

Labour unrest remains a lingering threat. A failure by the authorities to boost skills

levels could leave Vietnam a second-rate economy for an indefinite period.



Industry Forecast

Port Of Ho Chi Minh City Throughput

Short Term: Strong 2014 Growth Ahead

Container throughput is to remain impressive during 2014 as the Port of Ho Chi Minh City once more looks

set to hit double-digit year-on-year (y-o-y) growth in this sphere as it did in 2012. This annual increasewould be slightly up on last year's rise of 9.30% as the port shows little sign of slowing down in terms of its

very healthy gains in recent years. If realised, this would see box throughput reach 4.23mn TEUs.

Tonnage throughout on the other hand, although not anticipated to hit the same heady heights of the

container side, will still perform well in 2014 and beyond into the medium term. We have pencilled in

growth of 6.06% in 2014, which is slightly down on the past few years as global economic headwinds

weigh ever so slightly on demand. This scenario would see tonnage come in at 41.22mn tonnes by the end

of 2014.

Macro Picture Supporting Port Throughput

Vietnam - Real GDP Growth, % chg y-o-y, 2000-2018

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

f20

14f

2015

f20

16f

2017

f20

18f5

6

7

8

Source: Asian Development Bank, General Statistics Office



Investment in new facilities at the port complex, centred around the premier commercial centre of southern

Vietnam, support our view for the healthy rate of growth over the short and medium term. Despite a slow

start amid the bleak macroeconomic fundamentals affecting the eurozone, China and the US, there are signs

that Cai Mep International Terminal (CMIT) is beginning to outperform, placing upside risk on ourforecasts for the Port of Ho Chi Minh City as a result. We believe that Cai Mep's positive throughput

growth outlook for 2012 was in large part attributable to APM Terminal (APMT)'s operation of theterminal over the year, as the company poured in investment and attracted new clients operating on key

trade routes.

All Signs Pointing Onwards And Upwards

Vietnam's latest real GDP reading, which showed that the economy expanded by 6.0% year-on-year (y-o-y)in Q4 2013, has reaffirmed our conviction that the Vietnamese economy will begin 2014 on a strong note.Not only are we witnessing more evidence of a sustained pick-up in production activity and employment in

the manufacturing sector, but also expect foreign direct investment (FDI) inflows to accelerate as theeconomic recovery gathers pace over the coming quarters. We forecast real GDP growth to come in at 6.0%

in 2014, versus Bloomberg consensus of 5.5%. This feeds into our healthy projection for the Vietnameseshipping sector over the coming 12 months.

Additionally, it has long been our opinion that intra-Asia trade is a key area for future growth with the

Vietnamese port of Ho Chi Minh in a strong position to take advantage. The launch of Taiwan-based

Evergreen Line and South Korea-based Hanjin Shipping's intra-Asia service at the end of 2013, which callsat the port of Ho Chi Minh, will boost both companies' intra-Asia operations.



APMT's presence should support continued growth

at the port over the medium term (2014-2018) as itcontinues to improve the port's facilities and attract

shipping lines keen to capitalise on Vietnam's

positive macroeconomic outlook. Despite being

operational for just a year, CMIT likely handledclose to 600,000TEUs in 2012.

Medium Term: Impressive Growth Beckons

Impressive growth will be the order of the day for

the Port of Ho Chi Minh City over the medium term

to 2018. Tonnage throughput will average 6.88% to

reach 54.21mn tonnes by the end of the forecast

period in 2018. Container throughput is also set to

perform well to 2018, averaging 8.89%, which will

see throughput reaching 5.88mn TEUs by the end of

the forecast period. BMI highlights the substantial

investments APMT has made in CMIT since it opened in March 2011 as an important driver of growth and

believes this will continue to be the case.

BMI highlights that the Port of Ho Chi Minh previously only played a role as a feeder port, relying on the

transhipment of containers through one of Asia's larger, better equipped ports such as Singapore. Exposure

to these routes is in large part attributable to the port's ability to handle ultra-large container ships, which are

becoming the standard for shipping containers on Asia-Europe trade routes. This was demonstrated in

December 2011, when CMA CGM's 13,820TEU Laperouse docked at the terminal. We believe CMIT's

proven capacity for handling these vessels marked an important step for the terminal and will be a key

driver of growth over the medium term.

Growth Supported By TerminalInvestment

Port Of Ho Chi Minh City ContainerThroughput, TEUs, 2009-2018

Port of HoChi MinhCity(Saigon New)throughput, TEU (LHS)Port of Ho Chi MinhCity(Saigon New)throughput, TEU~ % y-o-y (RHS)

2009

2010

2011

2012

2013

e

2014

f

2015

f

2016

f

2017

f

2018

f0

2,500,000

5,000,000

7,500,000

10

20

e/f = BMI estimate/forecast. Source: VPA



With real GDP forecast to grow at an average annual

rate of 6.76% over the medium term to 2018, a key

driver of this growth will be the country's booming

export sector, providing a boost to the country's

shipping sector, especially the Port of Ho Chi Minh

City.

Long Term: Infrastructure Improvements

Needed

Capacity issues at the Port of Ho Chi Minh are

expected to dog Vietnam in both the short and long

term, although Cai Mep provides sizeable

opportunities. The solution to this disruptive

problem will not just be a small matter of capacityexpansion. BMI suggests that the country must also

put money into landside supply chain, such as road

and rail networks. These developments are

particularly vital if Vietnam is to achieve its aim of enabling Ho Chi Minh to handle larger container vessels

so that it can ship goods directly to destination markets.

Table: Major Port Data, 2011-2018

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Port of Ho Chi Minh City(Saigon New) throughput,tonnes '000* 33,450.71 36,029.40 38,866.71 41,222.56 43,986.36 47,175.83 50,747.63 54,212.19

Port of Ho Chi Minh City(Saigon New) throughput,tonnes, % y-o-y* 7.45 7.71 7.87 6.06 6.70 7.25 7.57 6.83

Port of Ho Chi Minh City(Saigon New) containerthroughput, TEU 3,066,234 - 3,841,371 4,225,508 4,563,463 4,952,531 5,389,585 5,881,329

Port of Ho Chi Minh City(Saigon New) containerthroughput, TEU, % y-o-y 7.59 14.62 9.30 10.00 8.00 8.53 8.82 9.12

Port of Da Nangthroughput, tonnes '000 3,868.00 4,423.00 4,812.22 5,149.08 5,483.77 5,784.17 6,111.45 6,460.77

Strong And Steady Over MediumTerm

Port Of Ho Chi Minh City Throughput, Tonnes'000, 2009-2018

Portof HoChi MinhCity(Saigon New)throughput,tonnes '000 (LHS)

Portof HoChi MinhCity(Saigon New)throughput,tonnes~ % y-o-y (RHS)

2009

2010

2011

e

2012

e

2013

e

2014

f

2015

f

2016

f

2017

f

2018

f0

25,000

50,000

75,000

0

50

e/f = BMI estimate/forecast. Source: VPA



Major Port Data, 2011-2018 - Continued

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Port of Da Nang throughput,tonnes, % y-o-y 17.10 14.35 8.80 7.00 6.50 5.48 5.66 5.72

Port of Da Nang containerthroughput, TEU

114,373.0 144,555.0 158,095.5 173,005.8 189,636.5 207,618.7 227,209.7 248,120.0

Port of Da Nang containerthroughput, TEU, % y-o-y 28.22 26.39 9.37 9.43 9.61 9.48 9.44 9.20

*2011 and 2012 figure is a BMI estimate. Source: VPA, BMI. e/f = BMI estimates/forecasts. Forecasts assume existenceof spare capacity and the correspondence of national trade trends at local port level.

Table: Trade Overview, 2011-2018

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Imports, real growth, % y-o-y 4.10 9.09 7.90 7.50 7.50 7.30 7.20 7.00

Exports, real growth, % y-o-y 10.78 15.71 6.00 5.60 5.80 6.20 6.60 6.80

Total Trade, real growth, % y-o-y 7.44 12.40 6.95 6.55 6.65 6.75 6.90 6.90

Imports, US$bn 112.4 119.0 137.2 159.3 182.3 206.5 234.7 266.1

Import growth, % y-o-y 24.2 5.9 15.3 16.1 14.5 13.3 13.7 13.4

Exports, US$bn 106.8 124.4 140.9 160.7 181.0 203.0 229.5 259.7

Export growth, % y-o-y 31.5 16.5 13.3 14.0 12.6 12.1 13.0 13.2

Total trade, US$bn 219.2 243.4 278.1 320.0 363.3 409.5 464.2 525.8

Total trade growth, % y-o-y 27.6 11.0 14.3 15.0 13.5 12.7 13.3 13.3

Source: National statistical authority, BMI. e/f = BMI estimates/forecasts

Table: Key Trade Indicators, 2011-2018

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Agricultural rawmaterials, imports,US$mn 3,732.44 4,358.92 4,947.19 5,651.36 6,374.98 7,168.92 8,103.55 9,198.02

Agricultural rawmaterials, imports,% y-o-y 39.98 16.79 13.50 14.23 12.80 12.45 13.04 13.51



Key Trade Indicators, 2011-2018 - Continued

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Agricultural rawmaterials, exports,US$mn 3,394.24 3,608.58 4,201.61 4,920.01 5,669.50 6,562.26 7,413.54 8,530.83

Agricultural rawmaterials, exports,% y-o-y -1.23 6.31 16.43 17.10 15.23 15.75 12.97 15.07

Ores and metals,exports, US$mn 794.19 935.47 1,068.14 1,226.94 1,390.13 1,565.55 1,778.73 2,018.89

Ores and metals,exports, % y-o-y 33.63 17.79 14.18 14.87 13.30 12.62 13.62 13.50

Ores and metals,imports, US$mn 4,378.10 4,656.14 5,425.41 6,357.30 7,329.54 8,307.16 9,529.55 10,815.26

Ores and metals,imports, % y-o-y 32.66 6.35 16.52 17.18 15.29 13.34 14.71 13.49

Iron and steel,exports, US$mn 2,000.34 2,391.69 2,759.15 3,199.03 3,651.04 4,185.09 4,743.74 5,446.41

Iron and steel,exports, % y-o-y 23.25 19.56 15.36 15.94 14.13 14.63 13.35 14.81

Iron and steel,imports, US$mn 75,011.2 79,418.4 91,611.9 106,383.3 121,794.1 137,855.5 156,863.8 177,722.9

Iron and steel,imports, % y-o-y 23.89 5.88 15.35 16.12 14.49 13.19 13.79 13.30

Manufacturedgoods, exports, US$mn 54,309.5 63,655.9 72,432.1 82,937.5 93,733.0 105,280.1 119,420.1 135,311.3

Manufacturedgoods, exports, %y-o-y 33.09 17.21 13.79 14.50 13.02 12.32 13.43 13.31

Manufacturedgoods, imports, US$mn

74,001.0 78,335.4 90,327.8 104,855.6 120,012.3 135,885.1 154,530.3 175,124.4

Manufacturedgoods, imports, %y-o-y 24.18 5.86 15.31 16.08 14.45 13.23 13.72 13.33

Fuels, exports, US$mn 17,072.69 19,770.74 22,304.17 25,336.79 28,453.14 31,908.45 35,909.69 40,715.06

Fuels, exports, %y-o-y 54.01 15.80 12.81 13.60 12.30 12.14 12.54 13.38

Fuels, imports, US$mn 14,084.81 14,935.88 17,290.57 20,143.09 23,119.08 26,263.28 29,906.30 34,006.69



Key Trade Indicators, 2011-2018 - Continued

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Fuels, imports, %y-o-y 45.81 6.04 15.77 16.50 14.77 13.60 13.87 13.71

Source: UNCTAD, BMI. e/f = BMI estimates/forecasts

Table: Top Import Partners, 2004-2012

2004 2005 2006 2007 2008 2009 2010 2011 2012

China, Mainland, US$mn 4,595 5,900 7,391 12,710 15,974 16,441 20,019 24,594 37,647

China, Mainland, US$mn, %of total 14.4 16.0 16.5 20.3 19.8 23.5 24.0 23.5 27.2

Korea, Republic Of, US$mn 3,359 3,594 3,908 5,340 7,255 6,976 9,761 13,176 17,541

Korea, Republic Of, US$mn,% of total 10.5 9.8 8.7 8.5 9.0 10.0 11.7 12.6 12.7

Japan, US$mn 3,553 4,074 4,702 6,189 8,240 7,468 9,016 10,400 11,803

Japan, US$mn, % of total 11.1 11.1 10.5 9.9 10.2 10.7 10.8 10.0 8.5

Singapore, US$mn 3,618 4,482 6,274 7,614 9,378 4,248 4,101 6,391 11,421

Singapore, US$mn, % of total 11.3 12.2 14.0 12.1 11.6 6.1 4.9 6.1 8.3

Thailand, US$mn 1,859 2,374 3,034 3,744 4,906 4,514 5,602 6,384 7,310

Thailand, US$mn, % of total 5.8 6.5 6.8 6.0 6.1 6.5 6.7 6.1 5.3

Total 31,969 36,761 44,891 62,765 80,714 69,949 83,365 104,510 138,166

Total, top 5 countries, US$m 16,984 20,424 25,310 35,597 45,753 39,648 48,500 60,944 85,721

% from top 5 trade partners 53.1 55.6 56.4 56.7 56.7 56.7 58.2 58.3 62.0

Source: IMF. N.B. Total exports is from Direction of Trade Statistics, consequently there may be some discrepancy withdata used elsewhere in this report

Table: Top Export Destinations, 2004-2012

2004 2005 2006 2007 2008 2009 2010 2011 2012

United States, US$mn 5,025 5,924 7,845 10,105 11,887 11,356 14,238 16,928 19,427

United States, US$mn, % oftotal 19.0 18.3 19.7 20.8 19.0 19.9 20.4 18.2 17.0

China, Mainland, US$mn 2,899 3,228 3,243 3,646 4,850 4,909 7,309 11,125 14,755

China, Mainland, US$mn, %of total 10.9 9.9 8.1 7.5 7.7 8.6 10.5 12.0 12.9



Top Export Destinations, 2004-2012 - Continued

2004 2005 2006 2007 2008 2009 2010 2011 2012

Japan, US$mn 3,542 4,340 5,240 6,090 8,468 6,292 7,728 10,781 13,722

Japan, US$mn, % of total 13.4 13.4 13.2 12.5 13.5 11.0 11.1 11.6 12.0

Korea, Republic Of, US$mn 608 664 843 1,243 1,794 2,065 3,092 4,715 5,199

Korea, Republic Of, US$mn,% of total 2.3 2.0 2.1 2.6 2.9 3.6 4.4 5.1 4.6

Germany, US$mn 1,065 1,086 1,445 1,855 2,073 1,885 2,373 3,367 5,070

Germany, US$mn, % of total 4.0 3.3 3.6 3.8 3.3 3.3 3.4 3.6 4.4

Total 26,485 32,447 39,826 48,561 62,685 57,196 69,820 92,881 113,944

Total, top 5 countries, US$m 13,139 15,242 18,616 22,939 29,072 26,507 34,740 46,916 58,173

% from top 5 trade partners 49.6 47.0 46.7 47.2 46.4 46.3 49.8 50.5 51.1

Source: IMF. N.B. Total exports is from Direction of Trade Statistics, consequently there may be some discrepancy withdata used elsewhere in this report



Market Overview

Vietnam Container Shipping Market Overview

We have long been of the opinion that intra-Asia trade is a key area for future growth with the Vietnamese

port of Ho Chi Minh very well placed to take advantage. The launch of Taiwan-based Evergreen Line and

South Korea-based Hanjin Shipping's intra-Asia service at the end of 2013, which calls at the port of HoChi Minh, will boost both companies' intra-Asia operations.

The New Ho Chi Minh Service (NHCMS) will see both firms receive a boost to their intra-Asia network.The NHCMS will link South Korea, China, Vietnam, Singapore and Malaysia, and will employ four 2,500

twenty-foot equivalent units (TEUs) ships, one supplied by Evergreen and the remaining three by Hanjin.The first vessel on the once-a-week NHCMS set sail from Kwangyang, South Korea, on November 22.

The Port of Ho Chi Minh City has expanded to become the largest facility in southern Vietnam. It now

accounts for more than 65% of port throughput in the Ho Chi Minh City area and 42% of throughput in

Vietnam as a whole. In 2013, the port handled an estimated 3.83mn twenty-foot equivalent units (TEUs), upfrom 2012's 3.51mn TEUs. The port comprises three cargo terminals, as well as depot and customs points,

which are situated at different locations within the Mekong Delta area in south-east Vietnam, in an area

measuring 60km in circumference.

Cai Mep is Vietnam's largest deep sea facility. The Port of Cai Mep was developed in response to the rapid

growth in trade volumes at the Port of Ho Chi Minh, which caused congestion in the area. The Cai Mep

facility is located approximately 85km south east of Ho Chi Minh City, at the mouth of the South China

Sea.

Net Exports Present Downside Economy Risks

Net exports remain the biggest downside risk to our outlook for the Vietnamese economy, although we

expect external demand to pick up in 2014. Vietnam's trade account has fallen back into deficit in recent

months, but we see the case for a substantial pickup in external demand on the back of a rebound in regional

growth over the coming quarters. Accordingly, we still expect exports to expand at a moderate pace of 5.9%

in 2014.

Vietnam's export sector has performed exceptionally well despite the lacklustre economic environment we

have seen across the region. Since June, the country has been running consistent monthly merchandise trade



surpluses averaging US$222mn in value (with the exception of a small US$88mn deficit in September).Although we acknowledge that imports have remained suppressed by weak domestic demand as households

hold back on spending amid uncertainties over the economy, we are nonetheless encouraged by the resilient

export data. Indeed, merchandise trade exports expanded by 16.2% y-o-y for the first 11 months of 2013.

Exports Could Get Further Boost From FDI

More importantly, we note that this has mainly been driven by increased foreign direct investment (FDI)inflows into the export sector - FDI-related exports made up an estimated 67% of total exports for the first

11 months of the year, according to figures published by GSO. We believe that as economic conditions in

Vietnam continue to improve as we head into 2014, we could see a further pickup in FDI inflows. This

should help to lend a further boost to exports. As of November, newly registered FDI has already surpassed

the government's full-year target of US$13bn, after having surged by 54.2% y-o-y in the first 11 months of2013 to US$20.8bn. Japanese and South Korean investors remained the largest source of FDI inflows forVietnam, accounting for US$4.8bn and US$4.0bn worth of registered FDI in the first 10 months of 2013,respectively.

In line with our view that the Vietnamese economy would accelerate forcefully into the final months of the

year (see 'Economy Picking Up Pace', October 4 2013), latest data released by the General Statistics Office(GSO) showed that the economy expanded by 6.0% y-o-y in Q413. This translates into full-year growth of5.4% for 2013, just slightly above our forecast of 5.3%. The latest GDP reading, combined with the strongset of economic data we have seen in recent weeks (accelerating foreign direct investment inflows,remittances, and merchandise trade exports), have reaffirmed our conviction that the Vietnamese economywill begin 2014 on a strong note.

Connectivity

In 2013, Vietnam scored 43.26 on UNCTAD's liner connectivity index - a considerable improvement on

2004's score of 12.86. However, we note that the country is actually on a downwards trajectory, havingpeaked in 2011 on 49.71, before falling to 48.71 in 2012. Although the port is trailing far behind regional

outperformer Singapore, it is well ahead of its neighbours Cambodia and the Philippines. Equally, the

facility is now in ninth place from the 14 Asian markets for which we produce Shipping reports, having

been firmly at the bottom of the pile in 2004. Crucially, Vietnam is better connected to international

shipping lines than neighbour, and competitor, Thailand, which will boost Vietnam's attractiveness to

manufacturers looking for the next factory of Asia, as wage increases in China has made the former holder

of the title less competitive.



BMI believes that this vast improvement in its connectivity score over seven years demonstrates Vietnam's

growing importance in global containerised shipping. The country also now has direct links with majormarkets in the West. However, it should be noted that Vietnam's place in global container shipping is not

yet assured, and that as the industry has struck difficulties Vietnam has been impacted more severely than

more established ports of call. This has been demonstrated by the fall in its score on the connectivity index

over the past two years.

Connection Slipping

Vietnam's Liner Connectivity Score

Source: UNCTAD

Vietnamese ports are well placed to take advantage of growing intra-Asia trade volumes.

The rapid growth in Vietnam's port volumes has attracted ample international investment in portterminals, giving rise to overcapacity concerns.

Alleviating economic headwinds in the US and China will support Vietnam's export markets andcontainer ports but the global economic situation continues to prove unpredictable.

We continue to caution that Vietnam needs to invest in its freight transport network in its entirety toensure efficiency at its ports.



Regional Role

The Port of Ho Chi Minh is a vital domestic and regional facility, with the port having rapidly expanded in

response to sharp growth in the Vietnamese economy. Container traffic through the port accounts for over

65% of Ho Chi Minh City's market share and more than 40% of the entire country's.

Rapid Climber

UNCTADstat Liner Connectivity Index For Asia In 2004 & 2011

Source: UNCTADstat

Intra-Asian trade has been growing rapidly, with many shipping firms using this to cushion themselves from

the slowly recovering big-money East-West routes. The Port of Ho Chi Minh has been a key part of this and

it is not only regional trade for which Vietnam is becoming key. In 2009, Hanjin Shipping became the firstcarrier to launch a direct service between Vietnam and the US. In September 2010, Hanjin became the firstline to launch direct Vietnam-Europe services, followed in October 2010 by CMA CGM making the

country a port of call on its FAL3 service.

The Port of Cai Mep was developed in response to the rapid growth in trade volumes at the Port of Ho Chi

Minh City, which caused congestion in the area. BMI notes that the terminal has a considerable advantage

over Ho Chi Minh, in that it offers a draft of 14m, thereby enabling it to serve post-Panamax container

vessels, which cannot call at other Vietnamese ports due to draft and turning restrictions.



The importance of the port's depth was reflected in December 2011, when Cai Mep International Terminal

(CMIT) docked its largest ever containership. The 13,830TEU CMA CGM Laperouse is the biggest vesselto dock in the Vietnamese port, with its accommodation made possible by the post-Panamax cranes

operating at the site.

BMI believes that Cai Mep's positive throughput growth outlook is in large part attributable to APM

Terminal (APMT)'s operation of the terminal, as the company has poured in investment and attracted newclients operating on key trade routes. We believe APMT's presence will support continued growth at the

port over the medium term (2014-2018) as it continues to improve the port's facilities and attract shippinglines keen to capitalise on Vietnam's positive macroeconomic outlook.

Cai Mep International Terminal (CMIT) at the Port of Ho Chi Minh City (also known as New Saigon Port),which is made up of a collection of terminals lying 50km away from Vietnam's capital city, handled nearly

600,000TEUs in 2012 - its first full calendar year of operation - according to estimates from Maersk Line

sister company APMT. CMIT accepted its first vessel on March 30 2011 and in the following nine months

to 2012 handled 186,000TEUs.

On The Up

Vietnam TEU Throughput, Total, 2000-2011

Source: World Bank



BMI highlights the substantial investments APMT has made in CMIT since it opened in March 2011 as an

important driver of growth. In addition to helping to construct the port, which it did through a joint venture(JV) with Saigon Port and Vietnam National Shipping Lines (Vinalines), APMT purchased two ladenreach stackers, an empty reach stacker, two empty container handlers and a 25-tonne forklift - all of which

were delivered by Konecranes in 2011. Weak infrastructure is one of the main factors holding back

Vietnam's shipping sector - the country ranks 111th out of 145 countries on the World Economic Forum's

Global Competitiveness Report on the Quality of Port Infrastructure. As such, APMT's commitment toimproving CMIT's facilities is an important step both for the terminal and the country's shipping sector as a

whole.

Investment in the port has allowed Cai Mep to attract a client base of some of the major players in the boxshipping sector. While a foregone conclusion, given APMT's close connection with the company, Maersk

Line began pulling into the port in August 2011, boosting throughput as expected. More significantly,

CMIT has added CMA CGM and the Grand Alliance - comprising shipping lines Hapag-Lloyd, Nippon

Yusen Kaisha (NYK), and Orient Overseas Container Line (OOCL) - to its client list. These lines notonly provide positive prospects for the port given their direct impact on throughput volumes, but also

because their presence signals the industry's confidence in the terminal's growth outlook and growing role in

the region.

An important aspect of the addition of these lines to the terminal is that they have exposed CMIT to the two

largest maritime trade routes: Asia-Europe and Asia-America. Maersk has added the port to its Transpacific

string from Asia to North America, while CMA CGM and the Grand Alliance have placed it on their Asia-

Europe routes, marking the first time Vietnam had been directly connected on either of these trade routes.

We highlight that Vietnam previously only played a role as a feeder port, relying on the transhipment of

containers through one of Asia's larger, better-equipped ports such as Singapore. Exposure to these routes is

in large part attributable to the port's ability to handle ultra-large container ships, which are becoming the

standard for shipping containers on Asia-Europe trade routes. This was demonstrated in December 2011,

when CMA CGM's 13,820TEU Laperouse docked at the terminal. We believe CMIT's proven capacity for

handling these vessels marks an important step for the terminal and will be a key driver of growth over the

medium term, though in the near term there are significant hurdles to be crossed.



Overcapacity Remains A Threat

The rapid growth in Vietnam's port volumes has attracted ample international investment in port terminals.

However, concerns are being raised about the possibility of overcapacity in the country's container port

sector. This a particular concern for operators at the Port of Cai Mep. In 2006, international terminal

operators secured stakes in nine terminals at the port after the government invited foreign investment,

believing that rising throughput volumes would be quickly soaked up by increasing capacity. Five of the

nine planned terminals are in operation in the Cai Mep area, but are working well below capacity, with as

little as 20% of capacity at CMIT being utilised. With additional new facilities due to come online, BMI

believes this is a considerable cause for concern. Further, as container shipping lines look to consolidate

their services Vietnam, as a relatively new addition, is at risk of being struck from the ports of call.

The lack of container traffic seen at the beginning of 2012 also poses problems for ports in the province of

Ba Ria-Vung Tau. Ports in the region have a total container handling capacity of up to 8mn TEUs; however,

the actual demand only comes to around 5mn TEUs. Ports in the Cai Mep-Thi Vai region of Ba Ria-Vung

Tau have been failing to attract a significant number of vessels, despite a total investment of over US$7bnby the end of 2011, according to reports. The region contains several modern container ports and is set to

open several more facilities in 2012 and 2013. Industry analysts attributed the failure to a lack of

infrastructure, which has caused capacity to remain largely underutilised. Only 62.5% of overall port

capacity in the province of Ba Ria-Vung Tau is in use.

It is in this atmosphere of concern over having grown too much too soon that the construction of Van Phong

International Transshipment Port has been halted at the behest of the Vietnamese Transport Ministry. The

decision to shelve the planned port - originally proposed to be completed by 2020 - was undertaken by the

Vietnamese deputy prime minister, Hoang Trung Hai and was made public in September 2012.

The estimated cost of the project was set to be US$3.6bn and the construction work would have included 37wharves at length of 12.5km. The initial stage of the project began in October 2009 and was pencilled in tobe completed by the end of 2012; however, financial mismanagement meant that the project fell way behindschedule. Vinalines, the project's investor, was urged to alter its plans by the Vietnamese government and sothe company came up with the idea of expanding the port in order to handle container vessels up to

12,000TEUs.

The deputy prime minister asked the Transport Ministry to look into the feasibility of raising domestic and

foreign investment to fund the project, which is located in Hon Gom peninsula. The Van Phong port has



become the target for criticism, as Vietnam's attractiveness for potential investors weakens. The Van Phong

site was described as too far from any major manufacturing companies, and the state's role in neglectingbetter infrastructure at strategic locations is being highlighted.

Road And Rail Links Need Investment

The Vietnamese government plans to deepen the Port of Ho Chi Minh City's draught, allowing larger

vessels to access the facility. BMI notes that these works are badly needed, as we are seeing a growing

trend of lines ordering larger container vessels. Recognising the need to cater for bigger vessels, Vietnam's

prime minister has directed the country's ministry of transport and its Maritime Administration to focus on

developing deep water ports. A channel depth of about 14m is required for non-tide restricted access for

vessels with capacity of up to 8,000TEUs.

BMI notes that while Vietnam's port sector has received plenty of investment, due to growing intra-Asia

trade volumes, the freight transport networks that link the ports with production and consumer centres are

badly in need of investment. Growth in box throughput at the nation's ports has far outpaced investment in

its freight transport network. In 2010 (latest available data), total container throughput at the country's portsreached 5.98mn TEUs, up 550% from the 919,264TEUs handled in 1999.

With a rating of 120 out of 142 in the World Economic Forum's 2012-2013 Global Competitiveness Report,

Vietnam's road infrastructure is the regional underperformer, trailing well behind regional leaders Singapore

and Hong Kong. The country's rail infrastructure fares slightly better, with a score of 68 out of 123. BMI

believes there must be more private and state investment in developing these links if the country's ports are

to take full advantage of increasing trade volumes.



Industry Trends And Developments

Evergreen-Hanjin's Intra-Asia Tie-Up Highlights Vietnam Growth Story

Taiwan-based Evergreen Line and South Korea-based Hanjin Shipping's newly launched intra-Asia service,which calls at the port of Ho Chi Minh, will boost both companies' intra-Asia operations. BMI has long

highlighted intra-Asia trade as a region of strong growth and we note the port of Ho Chi Minh to be a

specific beneficiary of the new route - with the launch of the service offering upside risk to our forecast for

the port.

Evergreen Line has partnered with Hanjin Shipping to launch the New Ho Chi Minh Service (NHCMS) thatwill see both firms receive a boost to their intra-Asia network. The NHCMS will link South Korea, China,

Vietnam, Singapore and Malaysia, and will employ four 2,500 twenty-foot equivalent units (TEUs) ships,one supplied by Evergreen and the remaining three by Hanjin. The first vessel on the once-a-week NHCMSis to set sail from Kwangyang, South Korea, on November 22.

BMI notes that Evergreen Line has steadily been expanding its intra-Asia service in 2013, with the addition

of a further two express routes: the first being a Colombo, Sri Lanka-Kochi, India, service; and the second

being an Indonesia-Malaysia service. Hanjin Shipping has been implementing a similar expansion strategy,with the addition of an Indonesia service in March 2013 and an Australasia service in July 2013.

BMI has previously identified the trend of intra-Asia trade as a strong growth area for container lines.

Growth in intra-Asia liner trade is developing from a low base and is set to continue expanding as China

rebalances its economy toward the consumer sector. The development of a consumer class in China means

that the country is increasing the number of containers it imports, rather than being primarily a box operator.

Evergreen and Hanjin's decision to include the port of Ho Chi Minh as part of its NHCMS is in line with theintra-Asia growth story seen in the region. The Vietnamese port in particular is showing strong historical

growth rates in container throughput - a trend we predict will continue over the medium term. Between

2008 and 2012 the port of Ho Chi Minh's container throughput experienced an annual average increase of

14.4% year-on-year (y-o-y). BMI forecasts this robust growth rate to continue over the medium term(2013-2018), albeit at a slightly slower pace, and forecasts container throughput at Ho Chi Minh expected toexpand by 53.1% from 2013 levels - an annual average increase of 8.9% y-o-y, to reach a throughput level

of 5.87mn TEUs in 2018.



Vietnam Set For Belgian Link-Up

Vietnam cemented its place as a strategically important growth region in December 2013 with news of a

collaboration agreement signed by the ports of Antwerp (the second largest port in Europe) and Zeebrugge,Rent-A-Port and Saigon Newport relating to the construction of a new bulk terminal in the port of Lach

Huyen in the north of the country.

Eddy Bruyninckx, CEO of Antwerp Port Authority, stated: 'Our subsidiary Port of Antwerp International

has been observing this growth market closely with a view to spotting opportunities that offer added value

for our port. Our partners can call upon a port that has developed into a leading international player with a

wide range of logistics, industrial and maritime activities.'

Meanwhile, further evidence of strong Flemish/Vietnamese relations were highlighted by the visit of

Flemish Minister for Mobility and Public Works Hilde Crevits to inspect the dredging work at the Soai Rap

project in November 2013.

Crevits said: 'The dredging by the DEME's dredger 'Uilenspiegel' are spectacular in Soai Rap. They are

technically advanced and offer a sustainable solution. This project also demonstrates the good cooperationwith Vietnam. Our dredgers are world class. I hope that Vietnam continues to rely on our expertise for

major projects.'

TSL, ASL Launch Second Service To Haiphong

Hong Kong's TS Lines (TSL) will launch its second service, HHX 2, to Haiphong in Vietnam. The service,which will be started in collaboration with Hong Kong-based Asean Seas Line (ASL), will double the callsat the port of Haiphong. TSL is expected to provide one 700 twenty-foot equivalent unit (TEU) vessel toreplace a 340TEU vessel. ASL will provide the second 700TEU vessel to operate the service. Apart from

this, TSL has joined its Hong Kong-Haiphong shuttle and its JTK service, which calls at ports in Japan,Taiwan, Korea and South China.

Wan Hai Lines To Start New Direct Service

Taiwanese shipping companies Wan Hai Lines and Yang Ming Line intend to begin a new direct service

between ports of Japan, South Korea and China to the Vietnamese port of Ho Chi Minh on November 29

2013. The service will be called KCV and it will function with three vessels with an intake of 1,200 twenty-



foot equivalent units. KCV is expected to provide better service coverage between Japan, Korea, China and

Vietnam.

DIS Orders New Tankers From Vietnamese JV

A total of four new product tankers were ordered by d'Amico International Shipping (DIS) from HyundaiVinashin for US$126m, it was announced at the end of 2013. The joint venture (JV) between VietnamShipbuilding Industry Group (Vinashin) and Hyundai Mipo Dockyard is set to deliver the four 39,000dwtvessels between November 2015 and October 2016.

Speaking about the deal, the CEO of DIS, Marco Fiori said: 'I am delighted to announce the deal for four

new additional vessels in continuity with the DIS strategies to innovate its fleet and increase its efficiency

through new eco-vessels, in order to represent one of the most modern and advanced fleet in the MR

market, to better fulfill the expectations of our clients.'



Company ProfileVietnam Petroleum Transport Company (VIPCO)

SWOT Analysis

Strengths Around 60% of VIPCO's fleet is employed by Petrolimex.

The company boasts a relatively young fleet.

It has diversified away from operating in a single sector, with a real estate arm.

Weaknesses VIPCO only operates in one shipping sector.

Opportunities The company plans to expand its fleet, although no further information is currently

forthcoming.

Petrolimex made a company announcement at the end of July 2013 to state that it

had signed a memorandum of understanding (moU) with Japan International

Cooperation Agency (JICA) and Tamada Industries, Inc. (Tamada) relating to

'cooperation in the trial project of double-shell tank against harmful matters'.

Threats Vietnam's reliance on imported refined products is decreasing as the country brings

online more refining capacity, which could negatively affect VIPCO. In the longer term,

Vietnam's refining capacity could allow the state to export.

Company Overview The Vietnam Petroleum Transport Joint Stock Company (VIPCO) offers maritime

transport for petroleum products. The company has a diversified portfolio, including

units that support its product tanker fleet - such as its port operations and freight

forwarding services. It is also engaged in real estate.

Strategy VIPCO has developed a fleet of six product tankers with a total capacity of 176,111

deadweight tonnes (DWT). The fleet is relatively young with an average age of 16 years.

VIPCO has a fleet expansion strategy in place and is prepared to invest either in

newbuilds or purchasing tankers under the age of 10 years. The company plans to

boost its fleet to 200,000DWT.



The majority of VIPCO's tanker fleet (60%) is employed to meet the transport needs of

the Vietnam National Petroleum Corporation (Petrolimex). The remaining 40% is charted

to other consignees.

Via its connection with Petrolimex, the company is able to cater for Vietnam's oil sector.

While Vietnam has estimated oil reserves of 4.6bn barrels, it imports refined products.

The company's shipping unit is complemented by its petrochemical terminal's sector.

The board of directors of Petrolimex announced the establishment of a new wholly-

owned subsidiary, PG Tanker, in 2013, with Nguyen Anh Dung made chief executive

officer. Headquartered in Hanoi, the subsidiary will be charged with transporting oil

products, marine services and the repair and building of tankers.

Financial Data 2013

Deputy General Director Tran Ngoc Nam explained at the end of December 2013 that

profits were low at Petrolimex, owing to the Vietnamese government's efforts to curb

inflation and stabilise the economy through retail price adjustment. In the first half of

2013 the company announced profits of VND898bn (US$42.69mn), however, according

to Viet Nam News, earnings fell short 'of the full-year target of the country's largest fuel

wholesaler at VND1.98trn (US$94.2mn) in 2013. With only 45 per cent of the plan

covered, Petrolimex said it will exert efforts to make it in the second half of this year.'

2011

For the final quarter of 2011, VIPCO registered a drop in net income to VDN8bn, down

from VDN51.7bn a year previously. Meanwhile, in mid-February 2012, the company saw

its share price fall 2.2% to VND4,500.

For the first half ended June 2011, the company reported a net profit of VND38.66bn

(US$1.88mn), which represents a 121% year-on-year (y-o-y) increase. Revenues rose

36% y-o-y to VND943.12bn during this period, while six-month earnings per share were

VND647, compared with less than half of that for the corresponding period of 2010.

Latest Activity Petrolimex Seeks Diesel Delivery

Petrolimex is seeking some 70,000 tonnes of diesel to be delivered in February 2014,

according to Business Recorder. Trade sources explained that Vietnam's top fuel

importer and distributor was looking to obtain two cargoes of 35,000 tonnes apiece,

which are to be loaded from Singapore, Thailand, South Korea, South China or Taiwan.

The tender will close on January 9 and is valid until January 14, and is necessary due to

Petrolimex skipping its first quarter term diesel and gasoline imports.



Vietnam National Shipping Lines (Vinalines)

SWOT Analysis

Strengths Diversified fleet operating in dry bulk, container and oil transport.

Largest commercial shipping line in Vietnam.

On December 16 2012, Vinalines launched the second biggest bulk carrier in Vietnam

in Hai Phong city. Named Vosco Sunrise, the bulk carrier has been designed to cater

for a deadweight of 56,200DWT.

Weaknesses Vietnam does not play a role on the major Asia-Europe routes, despite developing as

a direct port of call on these routes.

The US$3.6bn Van Phong International Port project, primarily constructed by state-

owned Vinalines, was suspended in June 2011 following a reassessment of the

geological conditions at the project site.

Vietnamese shipping company Vinalines is currently US$2.1bn in debt, reported

Reuters in June 2012.

Vinalines' heavy exposure to Vietnam's domestic transport sector, which has been

performing well recently, indicates that the firm's struggles go beyond the troubles

facing the global industry.

According to chairman of Vietnam Shipowners' Association Vu Xuan Quynh, a large

sell off of old tonnage is needed, with Vinalines seeking to offload around 1.4m dwt of

ships, Sea Ship News reported in July 2013.

Vinalines was asked by the government to withdraw its plans to participate in the

development of the northern Lach Huyen Port, reported Sea Ship News in March

2013. The company will continue to concentrate on its ongoing port projects;

however, Hanoi said that it needs to make arrangement of funds before it can mull

over additional expansion. Vinalines teamed up with Japan's Itochu, MOL and

NYK for the development of the port.

The death sentence handed out to Vinalines' former chairman at the end of 2013 for

embezzlement has done little for the company's reputation.



SWOT Analysis - Continued

Opportunities Vietnam is expanding its role in the global box market and it is fast becoming a

mainstay port of call on Asia-Europe services.

Potential to increase its intra-Asia role, shown by the expansion work at Cai Mep, and

well placed to be chosen as a partner on these services by major lines.

Threats While Vietnam has invested heavily in its port network, the logistics supply chain

could be let down by the landside freight network, which will have a negative impact

on operators.

In 2011, Vinalines posted its first ever loss in 15 years of operations, with further

losses expected.

Overcapacity is a threat over the medium term, unless money is pumped into port

facilities and infrastructure.

Vietnamese police issued an arrest warrant for the former chairman due to the

scandal rocking the debt-mired company. Duong Chi Dung has been accused of

deliberately mismanaging Vinalines during his tenure.

Vinalines has been stung by the poor performance of the three container terminals it

has joint venture interests in.

Company Overview Vinalines is Vietnam's largest commercial shipping line. Established in 1996, it caters for

domestic trade in Vietnam and offers intra-Asia services.

The company also has a port operating division that is the largest in Vietnam, controlling

and managing ports in Quang Ninh, Hai Phong, Da Nang, Ho Chi Minh and Can Tho.

Strategy Vinalines' 14 shipping companies operate a diverse fleet, dominated by dry bulk vessels

but also boasting container ships, oil and product oil vessels.

According to the company's website, Vinalines' fleet consisted of 128 vessels. The line

is looking to expand, with a plan centred on increasing the proportion of specialised

vessels such as box ships or oil tankers.

In order to achieve this, the line was seeking to spend US$2bn on ordering new ships

from Vietnamese yards seeking state funding for the plan. Vinalines has in fact ended

up expanding its fleet quicker than intended, with the shipping line taking on 36 vessels



from the debt laden Vietnamese shipbuilder Vinashin in July 2010. Vinaline's chairman,

Duong Chi Dung, said at the time that up to two-thirds of the acquired vessels could not

be used as they failed to meet technical requirements. He estimated that the company

would need to spend US$26mn to repair the vessels and purchase insurance cover.

Dung added that the company expected some financial aid from the government for the

project.

Vinalines services the trade needs of Vietnam's domestic shipping market, but also has

exposure to the intra-Asia trade lane after joining forces with NYK in December 2010 to

launch a Thailand-Vietnam-Singapore (TVS) service. Vinalines provides a 1,100 twenty-

foot equivalent unit (TEU) vessel for the service.

BMI believes that Vinalines' presence on the intra-Asia trade route will increase, with

major lines looking to expand into the route and the company well placed to enter

partnerships with them. Vinalines is also increasing its contacts in the container sector,

partnering with a number of the majors on container terminal projects in Vietnam.

According to Port Strategy, Vietnam is of increasing interest in East Asia, due to the fact

that it is focusing on becoming better connected with both short and long haul

destinations. Providing the bedrock to this strategy are the new terminals constructed in

the Cai Mep area.

In September 2013, the wholly-owned limited liability company, Quy Nhon port under

Vinalines launched an initial public offering as part of ongoing restructuring of the

company, approved back in February 2013.

In a high-profile court case in Hanoi in January 2014, the former chairman of Vinalines,

Duong Chi Dung admitted to handing out bribes to members of the country's ruling

communist party in a bid to avoid his imminent arrest for embezzlement. Dung was

sentenced to death in December for siphoning off millions of dong from the company.

Financial Data 2013

Vinalines is bracing itself for a full-year loss of VND2.1trn (US$101mn) already as the

company continues to perform abysmally following 2012's reported loss of VND2.44trn.

The company's CEO, Nguyen Canh Viet, said: 'There are few transporting contracts

amid these crisis times, while several partners refused to clear their payment on time,

despite the cheap fares.'

2012

Vinalines announced a VND1,439bn (US$69.2mn) loss during the first half of 2012,

which is around double the losses incurred for the corresponding period a year

previous. The loss was attributed to a 'perfect storm of liquidity and jobs woes',

according to Vinalines Director Nguyen Canh Viet, reported by Vietnam Investment

Review.



Financial Data 2011

Vinalines recorded a VND62.15bn (US$3mn) profit for 2011, despite posting a loss of

VND660bn (US$32mn) in H111 - the first time this has ever occurred in the company's

15 years of operations. The results came as a surprise to analysts who were expecting

the company to suffer from the sinking of the bulker Vinalines Queen. In 2011, Vinalines

shipped 36.8mn tonnes of cargo, which was a 1% annual increase on 2010.

Latest Activity Former Vinalines Bosses Sentenced To Death

In a bid to curb corporate graft, the government of Vietnam announced in December

2013 that two former Vinalines bosses - Tran Ba Hung, former head of Hyundai-

Vinashin Shipyard's Manufacturing Department; and Pham Ba Giap, director of Nguyen

An Limited Company - are to be sentenced to death for 'asset misappropriation'. The

sentences relate to the signing of a contract for floating dock 83M back in 2008

destined for Van Phong Port.

While Tran Hai Son is alleged to have colluded with Tran Van Quang, Tran Ba Hung and

Pham Ba Giap over the penning of repair contracts worth around VND8.7bn (US

$411,000) with Nguyen An Limited Company, Tran Hai Son is alleged to have

misappropriated a larger sum and also admitted to spending VND300mn on gifts for

former Vinalines Chairman Duong Chi Dung.



Shipping - Global Industry View

Container Demand: Growth Outlook To Bolster 2014 Box Volumes

A continued recovery in 2014 in the major consumer markets of the US and Europe will boost demand inthe container shipping sector, enabling it to suck up some of the overcapacity in the market, which has

plagued the container shipping sector in recent years, negatively impacting freight rates and by extension

container lines' financial results.

The US and Europe, the world's major consumer markets, continue to recover, with US growth forecast tostrengthen by 2.8% in 2014 - up from an estimated 1.8% in 2013. A bellwether of Europe's recovery, the

eurozone, is projected to recover from two consecutive years of recession in 2014, with a growth of 1.0%projected.

Growth Recovery

US & Eurozone Real GDP growth, % y-o-y

e/f= BMI estimate/ forecast. Source: National Statistics Authorities



BMI also highlights the growing consumer demand stemming from emerging markets, specifically China,

which has the potential to become a consumer powerhouse and is steadily shifting its focus from being a

supplier of consumer goods to be a consumer in its own right.

The strengthening in demand for container shipping is already being felt in the industry. At the world's top

five largest ports (the ports of Shanghai, Singapore, Shenzhen, Hong Kong and Busan) between January-November 2013 container throughput levels have increased by 1.6% y-o-y to reach 118.5mn TEUs.

The outperformer of the five is South Korea's port of Busan, which has recorded a 4.0% y-o-y increase in

throughput for the first 11 months of the year, with the port's role in the global transhipment market steadily

increasing. The market leader Shanghai has also performed well, with y-o-y growth of 3.8% - the only port

out of the five to record a strengthening in growth y-o-y. The underperformer of the group remains Hong

Kong.

Shanghai Driving Growth

Global Top Five Ports Jan-Nov 2012 % 2013, % Change y-o-y

Source: Port Authorities

The port of Hong Kong is steadily losing out to mainland China ports as liners choose to go direct, thereby

negatively impacting Hong Kong, as its primary role is to serve as a transhipment hub for China. In 2013



the port lost its third place position to Shenzhen, with volumes in January-November 2013 falling by 4.2%

y-o-y. BMI does however highlight that the decline in Hong Kong's container throughput is slowing, as in

January-November 2012 container levels at the port were down by 4.6% y-o-y.

In 2014 BMI projects the container throughput volumes at the top five ports to strengthen as themacroeconomic climate continues to improve. We forecast that total container throughput at the top five

global ports will increase by 3.5% y-o-y in 2014 to reach 133.9mn TEUs, up on the 1.7% increase we

estimate for the ports in 2013.

Bellwethers Indicate Box Growth

Global Top Five Ports Total Container Throughput, TEUs* & % change y-o-y

*Global Top Five Ports = Shanghai, Singapore, Shenzhen, Hong Kong and Busan. e/f = BMI estimate/forecast. Source: Port

Authorities



BMI forecasts that each of the five ports will witness an improvement in throughput growth, and Shanghai

is projected to outperform, with a growth of 5.7% forecast.

US: Recovery Strengthening

The US, the largest consumer market in the world, with the consumer sector the major driver of thecountry's economy, continues to grow. After a projected slowing in growth in 2013, with BMI estimatingan increase of 1.8%, compared to the 2.8% growth recorded in 2012, we forecast a strengthening of growth

in 2014, with real GDP forecast to increase by 2.8%.

BMI highlights that despite the slowing in the US economy's growth the total throughput recorded at the

country's bellwether ports of Los Angeles and Long Beach has been robust. In January-November 2013

total throughput volumes at the port increased by 3.0%, up from the 1.0% y-o-y growth recorded in the first

11 months of 2012. For the full year of 2013, BMI forecasts a y-o-y increase in throughput of 3.0%, with

the total for both ports projected to reach 14.6mn TEUs, up from the 14.1mn TEUs handled in 2012. Thisthroughput level for 2013 would take the port's total throughput levels back to 2008 levels.



Boxes Booming On The West Coast

Port of Los Angeles & Long Beach Container Throughput, TEUs & % change y-o-y

Source: Port Authority

When analysing the US' container throughput outlook it is imperative to measure the throughputs of both

the US West Coast ports of Los Angeles and Long Beach, as they compete with one another for market

share. For example in 2013 the port of Long Beach outperformed in terms of growth, with box volumes at

the facility in January-November 2013 increasing by 12.1%, while at the port of Los Angeles container

levels dipped by 3.7% y-o-y.

The reason for Long Beach's increase at the expense of the port of Los Angeles is that the former is now

capable of handling 14,000TEU ships, with vessels of this size added to MSC and CMA CGM loops

calling at the port.

BMI forecasts 2014 demand to be even stronger at the US West Coast ports. The consumer picture

continues to brighten, with the University of Michigan's Survey of Consumer Confidence Sentiment

December 2013 reading increasing both month-on-month (m-o-m) by 10% and y-o-y by 13% to reach 82.5.



Recovering Consumer To Boost Throughput

University Of Michigan Survey of Consumer Confidence Sentiment (LHC). Port Of Los Angeles& Long Beach Container Throughput, TEUs & y-o-y % Change (RHC)

e/f= BMI estimate/forecast. Source: Bloomberg, Port Authority

This strengthening in the country's consumer ties into BMI's improving growth outlook for the US in 2014

and will have a positive impact at the country's ports. In 2014 we project the port of Los Angeles and LongBeach to handle a total of 15.4mn TEUs, a y-o-y increase of 6.0% - a strengthening on the 3.0% y-o-y

growth predicted for 2013 - with the ports well on their way to once again hitting the 15.76mn TEU

milestone set in 2006.

Europe: Back To Growth

Europe's recovery is set to get underway in 2014, with BMI predicting that 2014 will be the year that the

eurozone pulls out of recession. After two consecutive years of contraction, BMI is forecasting eurozone

real GDP to grow by 1.0% in 2014.



European Recovery Continues

Germany, France & United Kingdom Real GDP growth, % y-o-y

e/f= BMI estimate/forecast

The improvement in Europe's economic outlook is being driven by the region's three largest economies,

with Germany, France and the UK all projected to record y-o-y improvements in economic growth in 2014.

For those operating in the container shipping sector in Europe, the latest consumer sentiment data for the

region will bolster their outlook. According to information released by the European Commission's

Business and Consumer Survey, consumer sentiment in the region is ticking up. The European

Commission's Business and Consumer Survey ended 2013 on a high of -13.6, up 43% y-o-y and a level not

seen since July 2011.



Consumer In Recovery

European Consumer Sentiment

Source: European Commission's Business and Consumer Survey

BMI highlights that the improving consumer sentiment is a longer term trend, with the European

Commission's Business and Consumer Survey rating steadily improving throughout 2013.

The strengthening European demand outlook will positively impact the region's ports, with its bellwether

facilities in the frontline to benefit.

2013 data have so far been released by Europe's largest and third largest ports, the ports of Rotterdam and

Antwerp, with both facilities still recording y-o-y declines in throughput and a worsening y-o-y picture. The

only European bellwether port to have witnessed a y-o-y improvement in throughput volumes and growth,

is the second placed port of Hamburg. The German port has yet to release its full 2013 data, but in its

January-September 2013 results it recorded a y-o-y growth of 3.6%. BMI estimates that the port's box

throughput increased by 3.5% in 2013, an improvement on the 1.3% contraction recorded in 2012.



Box Ports Back To Growth

Port Of Rotterdam, Hamburg & Antwerp Container Throughput, % Change y-o-y

*2013 data is a BMI estimate. Source: BMI, Port Authority

In 2014 BMI is forecasting growth at all three of Europe's bellwether ports, and we also project astrengthening in demand at all three. We highlight that our view of an improving box outlook in Europe

appears to be shared by the ports, with the port of Rotterdam announcing a 1.0% increase on its port tariffs -

an increase that will take its tariffs back to the pre-downturn levels of 2008. The port of Rotterdam, like

others in Europe and worldwide offered discounts to the shipping industry during the downturn in the

sector, and the decision to increase tariffs once more indicates that port authorities are detecting that a

recovery is underway.

China: A Consumer Power House In The Making

The US and Europe remain the world's largest consumer nations, but steadily China is developing into a

consumer player. This is greatly impacting the container shipping sector, as the country is becoming a majorimporter of goods shipped by boxes, rather than just the world's largest container exporter.

The development of China's consumer class is the key driver to the emergence of Intra-Asia trade, with the

country seeking its box imports from the Asia region.



China Economic Growth Slowing, But Consumer Growing

LHC: China Real GDP growth, % y-o-y. RHC: China Total Household Spending, US$ % y-o-y

e/f= BMI estimate/ forecast. Source: National Bureau of Statistics China

China's decision to rebalance its economy away from a raw materials importer to being driven by the

consumer sector, will lead to a slowing in the country's growth. BMI forecasts the country's real GDP to

grow by 6.1% over the medium term (2014-2018) compared to the 8.8% annual average increase recordedin the previous five years (2009-2013).

However the country's growth, despite this slowing, remains robust. Vitally for the consumer sector, and by

extension the container shipping sector, China's total household spending is forecast to remain in double

digits, expanding by an annual average of 11% between 2014-2018.


Business Monitor International Page

Documents

BMI Vietnam Shipping Report Q2 2014