TPS assesses the outlook for the Port and Shipping industry to be positive in the second half of 2024 thanks to high anchoring sea freight rates and recovering demand in Vietnam’s export markets.
Fares remain high
In the recent Port and Shipping Industry Report for the second half of 2024, Tien Phong Securities Company (TPS) said that in 2023, the global shipping market was quiet as the internal strength of global trade was still quite weak, which led to a downward trend in sea container freight rates for most of 2023. This also clearly reflected the business results of shipping lines in 2023, with EBIT margin continuously decreasing from 13.1% in the first quarter of 20233 to -3% in the fourth quarter of 2023. However, the business results of shipping lines are forecast to be better in 2024 when demand recovers, and freight rates have also recorded a significant increase compared to the same period.
Regarding freight rates, TPS believes that the situation has changed rapidly since the beginning of 2024, with the global container freight index reversing sharply from 1,661 USD/FEU in December 2023 to 3,964 USD/FEU in January 2024. This situation stems from two main reasons: the conflict between Israel and Hamas broke out in October 2023 and led to attacks on cargo ships by the Houthi forces in the Red Sea from December 2023; the Panama Canal is facing the most severe drought in 50 years, due to the influence of El Nino, forcing the canal to reduce traffic; the frequency of empty container shortages is increasing.
To date, freight rates remain high, up 50.5% compared to April 2024 and up 145.5% compared to the end of 2023, as the Houthi forces continue to declare an expansion of the attack area to the Indian Ocean (April 25) and the Mediterranean Sea (May 3) and the drought situation at the Panama Canal has not improved.
From there, this Securities Company still assesses the industry’s prospects to be positive in the second half of 2024 thanks to: Consumer sentiment in the US and EU is on a recovery trend, supporting sales in the coming time, although still lower than pre-COVID-19 levels; PMI of major economies is showing a positive recovery in the first half of 2024; Inflationary pressure cools down and remains low, supporting consumption; High demand for freight transport entering the peak season of the third and fourth quarters of 2024.
“We see many factors helping freight rates remain high as the conflict in the Red Sea shows no signs of abating as the Houthi forces have recently repeatedly announced their expansion of their attacks to the Indian Ocean and Mediterranean. This continues to put additional pressure on the shipping industry,” TPS assessed.
However, TPS also believes that the factors that will help cool down freight rates in the coming period are the expectation that the water level of Gatun Lake will improve when Panama enters the rainy season (May – November), and at the same time, the La Nina phenomenon will also return, which will help cargo ships avoid going through conflict areas, shortening the time from Asia to the EU, creating conditions for freight rates to cool down.
Many clear signs of recovery
For the domestic market, TPS said that the export turnover of goods in April 2024 was estimated at 30.4 billion USD, down 8.1% compared to the previous month, but up 10.6% over the same period last year. In the first 4 months of the year, the export turnover of goods reached 123.64 billion USD, up 15% over the same period. Regarding the export structure of the whole country in the first 4 months of the year, the processing industry accounted for 87.5%, agriculture and forestry products accounted for 8.9%, fishery products accounted for 2.2% and fuels & minerals accounted for 1.4%.
Import turnover of goods in April 2024 is estimated at 30.26 billion USD, down 2% compared to the previous month and up 19.9% compared to the same period last year. In the first 4 months of the year, import turnover of goods is estimated at 115.24 billion USD, up 15.4% over the same period. Regarding the import structure of the whole country in the 4 months of 2024, production materials accounted for 95% and consumer goods accounted for 5%. The trade balance in April 2024 had a trade surplus of 0.68 billion USD. In the first 4 months of 2024, the trade balance had a trade surplus of 8.4 billion USD.
The PMI index in April 2024 also returned above the 50-point threshold, at 50.3 points, which is considered a signal that the health of Vietnam’s manufacturing industry is improving. According to S&P Global, the number of new orders in Vietnam’s manufacturing industry has also increased positively after a previous period of weakness.
Regarding the volume of goods passing through Vietnam’s ports, it continues to record positive growth. According to the Vietnam Maritime Administration, the total output after the first 4 months of 2024 is estimated at 277 million tons, up 20% over the same period. Of which, both exports and imports witnessed strong growth over the same period, up 19% and 31% over the same period, respectively.
Regarding container cargo, according to TPS, customs clearance volume in the first four months of the year reached 9.3 million TEUs, up 27% year-on-year; of which, domestic cargo recorded the strongest increase of 38% year-on-year to reach 3.4 million TEUs; export and import cargo recorded increases of 22% and 20% year-on-year, respectively.
Commenting on the industry’s prospects in the second half of 2024, TPS said that the favorable import-export situation and port throughput results in the first 4 months of the year are reinforcing expectations about the prospects in the last 2 quarters of the year, with supporting factors for Vietnam’s seaport industry still being maintained such as: Global inflationary pressure cools down; The US may recognize Vietnam as a market economy in June 2024; China’s retail sales maintain positive growth momentum; The market begins to enter the peak season in the third and fourth quarters, this is the period when importers prepare goods supply for the holidays; Deep-water port loading and unloading rates increase by 10% according to Circular 39/2023 effective from February 15, 2024
According to stockbiz.vn
