VietNamNet Bridge – Hundreds of millions of dollars have been flowing back into the pockets of foreign ship owners since the port operators in the Hai Phong City area have been scrambling for clients by dramatically reducing container handling fees.

Foreign ship owners make profits in troubled waters

A report showed that 11 out of 36 port operators have been providing services in Hai Phong City, with 26 container harbors. The loading and unloading capacity is 500-800 TEU/meter/year. The average container handling fee ports charge foreign shipping firms is $36.5 per 20-feet container and $55 per 40-feet container.

According to Trieu Thuan, a senior executive of the Dinh Vu Port, the 20-feet container handling fee at one point dipped to $30-32, well below cost. Some other ports even tried to scramble for clients by offering some free support services.

Truong Van Thai, Deputy General Director of the Hai Phong Port, said that port operators in the area have simply been following the rules of healthy competition.“Port operators regularly survey the market to find out the fees quoted by other ports, and then set up the same fees or a little bit lower to compete for clients,” Thai said.

Bui Thien Thu, Deputy Head of the Vietnam Maritime Bureau (Vinamarine), warned that the competition is unhealthy when container handling fees drop dramatically below operating costs, seriously affecting the ports’ revenues. With modest revenues and profits, or possibly even losses, port developers will not have money for re-investment, harbor and equipment upgrading.

Thu stressed that Vietnamese goods owners do not benefit from the container handling fee reductions, because in most cases, Vietnamese businesses buy goods under CIF (cost, insurance, freight) and sell goods under FOB (free on board) contracts.

The biggest beneficiaries from the unhealthy competition, according to Thu, are the foreign ship owners. In fact, the fees ship owners pay to Vietnamese ports only amounts to about 1/3 of the fee they charge on goods owners ($96 per 20-feet container and $148 per 40-feet container).

“With 2 million containers of imports and exports going through Hai Phong’s ports every year, foreign shipping firms collect over $200 million from Vietnamese goods owners and only pay 1/3 of the sum ($70 million) to the port owners,” Thu said.

Negotiating prices, why not?

Under the current laws on price management, since 2002, the port services’ fees have been determined by the market’s rules and managed by the State. The port service fees are determined by port directors, who also need to make declarations about the fees with the Ministry of Finance or local finance departments.

Analysts believe that the best solution to the problem is that involved parties sit together and consult with each other about the fees.

However, they said, negotiations between container exploitation businesses and container shipping firms still cannot be conducted right now, because many port developers still have not made price declarations.

Thu of Vinamarine said the agency has proposed that the Ministry of Transport and relevant ministries instruct businesses to make price declarations in June, which would pave the way for the container handling fee negotiations in Hai Phong City area.

GTVT