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December 14th, 2011 WW Staff | NikeLeaks Cables: Asia
 

Vietnam: GLOBAL SLUMP SLASHES HCMC PORT VOLUMES

     
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Reference ID: 09HOCHIMINHCITY62
Created: 2009-01-22 10:13
Released: 2011-08-30 01:44
Classification: UNCLASSIFIED//FOR OFFICIAL USE ONLY
Origin: Consulate Ho Chi Minh City

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ZNR UUUUU ZZH
O P 221013Z JAN 09
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5340
INFO RUEHHI/AMEMBASSY HANOI PRIORITY 3542
RUEHHM/AMCONSUL HO CHI MINH CITY PRIORITY 5576
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUCPDOC/USDOC WASHDC PRIORITY 0108
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000062
 
SENSITIVE
SIPDIS
 
STATE FOR EAP/MLS, USAID/ANE, EEB/TPP/BTA/ANA
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO
TREASURY FOR CHUN
 
E.O. 12958: N/A
TAGS: ECON ELAB ETRD EWWT SOCI PGOV VM
SUBJECT: GLOBAL SLUMP SLASHES HCMC PORT VOLUMES
 
REF: A) HCMC 11 "FALLING U.S. CONSUMER DEMAND PROMPTS CLOSINGS"
 
HO CHI MIN 00000062  001.2 OF 002
 
 
1. (SBU) Summary.  The global economic slowdown has slashed Ho
Chi Minh City (HCMC) cargo throughput by over 50 percent,
forcing port operators, shipping firms and freight forwarders to
aggressively reduce fees and cut costs.  Although the
international shipping company American President's Line has cut
capacity by 20 percent, they report that trade volumes from
garments and apparel are down only marginally, while niche
cargos such as refrigerated seafood shipments have increased.
Thinking long-term, the cargo industry wants desperately to hold
on to valued staff and is deferring decisions on layoffs until
early spring, hoping for a rebound in U.S. and European consumer
sentiment.  End Summary.
 
Global Slowdown Slashes Cargo Volume
------------------------------------
2. (SBU) With factories closing by the hundreds, (reftel A) an
odd calm has replaced the frenzy of crane, barge, and truck
traffic that usually jams HCMC's ports the weeks before the
Lunar New Year Tet Holiday.  Wann Shang Jye, General Director of
the Vietnam International Container Terminal (VICT), HCMC's
busiest foreign-invested container port, told EconOff that
container volumes crashed in the fourth quarter of 2008, and
were down over 50 percent against last year.  Bui Quang Hung,
Managing Director Vietnamese freight forwarder Sunny
Transportation said overall business was down 60 percent in the
last month, with U.S.-bound footwear shipments decreasing by
half.  The Managing Director of the American President's
Line-Vietnam (APL), a subsidiary of Singapore-based shipper
Neptune Orient Lines, said that the company laid up 20 percent
of their trans-Pacific fleet in November, three months earlier
than the usual post-Tet maintenance break.
 
Revenues Plunge on Lower Volumes
--------------------------------
3. (SBU)  Port operators, shipping firms and freight forwarders
are not only seeing revenues shrink from lower trade volumes,
but are also being forced to cut fees to maintain a shrinking
customer base.  Hung of Sunny Transportation said the cost to
ship a twenty-foot equivalent container from HCMC to Europe has
decreased from $1200 to $300 in the past year, while air freight
costs to Los Angeles have dropped from $3 per kilogram to $1.40
in the same time period.  VICT officials anticipate lowering
port fees seven to ten per cent in upcoming months, while the
state-owned freight forwarder VINATRANS said it had just lowered
its fees by an average of 60 percent, despite the fact that
December revenues were down 40 percent from last year.
 
Cutting Costs, not Staff (So Far...)
------------------------------------
4. (SBU)  While none of our shipping interlocutors have enacted
major layoffs, all were slashing operating costs.  VICT has cut
entertainment expenses, deferred port equipment maintenance,
prohibited truck engine idling, and is negotiating salary
contracts with stevedores and truckers that are well below
inflation.  Hung said Sunny Transportation will use the lull in
business to focus on staff training, noting he was loath to risk
losing highly-skilled employees.  VINATRANS said that as an SOE,
it cannot legally layoff workers until it is functionally
bankrupt, but instead it will begin to lower staff salaries in
10 percent increments in coming months if the downturn
continues.  With the exception of VINATRANS, however, all of the
firms said layoffs in the second or third quarter of 2009 were
inevitable if trade volumes don't recover.  (Note:  APL laid off
approximately ten percent of its world-wide workforce last
month, but said layoffs in Vietnam to date were 'minor'.  End
Note.)
 
Economic Cycle Brings Shared Hardships
--------------------------------------
6. (SBU)  The Director of VINATRANS told EconOff "it was much
worse in 1986", while reminiscing about that era's 500 per cent
inflation, echoing a common theme of determined resilience
voiced by all of our Vietnamese interlocutors.  Others told us
that "we survived the (U.S.) embargo" and "no one will starve"
(noting Vietnam's strong agricultural sector), indicating that
Vietnam's tumultuous economic history had prepared them for the
hardships of the current downturn.  Despite some griping about
the easy access to credit enjoyed by SOE conglomerates, our
Vietnamese interlocutors took comfort in the fact that
transportation sector enterprises "were in this together."
 
Niche Markets, Higher-End Products Still Shipping Strong
--------------------------------------------- -----------
 
HO CHI MIN 00000062  002.2 OF 002
 
 
7. (SBU)  Several isolated sectors of growth and stability stand
out amid the collapsing trade data.  APL said their one growth
area was in refrigerated containers to the EU and Russia, and
speculated that hard economic times were substituting Vietnamese
catfish (tra and basa) for Atlantic salmon on European dinner
plates.  Explaining why APL's container throughput was down less
than its competitors (down 20 percent versus an overall HCMC
port volume decrease of 50 percent) APL's Managing Director
explained that most of the factories that have closed so far in
southern Vietnam are small, low-end producers, not the
sub-contractors of the major brand names (e.g., Nike and Gap)
that constitute APL's core customer base.
 
Comment:
--------
8. (SBU) Vietnam's shipping sector is in survival mode, cutting
costs and slashing fees in order to hold on to valued employees
and customers until trade volumes pick up again.  If European
and U.S. retailers are still sitting on sizeable stocks of
unsold merchandise stock by early spring, the shipping slump
will likely worsen, and major layoffs can be expected at private
and foreign-invested shipping firms.  End comment.
 
9. (U)  This cable was coordinated with Embassy Hanoi.
FAIRFAX

 
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