Can Gio super port is a bridge too far

June 12, 2023 | 03:11 pm PT
Tran Nguyen Researcher
Vietnam is eyeing construction of a "super port" in Can Gio at a cost of US$6 billion, but it is too big a task for the coastal town.

According to the proposal, when completed, Can Gio port will be able to handle 10-15 million TEUs a year and become the fourth super port in Southeast Asia after that of Singapore (37.47 million TEUs) and two in Malaysia, Port Klang (13.72 million TEUs) and Tanjung Pelepas (11.20 million TEUs).

With revenues averaging $200/TEU, according to data from a port operator, Can Gio can earn $2-3 billion annually not including revenues from ancillary activities.

Gateway and transshipment are the two main services in international container transport. A gateway port is the beginning or end of the container ocean freight chain, while a transshipment port acts as an intermediary for moving containers between lines of ships.

The market for a gateway port is the inland area (hinterland) connected to the port by road, rail or river transport. The market for a transshipment port is other ports via sea.

If a gateway port is associated with home field advantage, a transshipment port depends on the ability to attract goods from the away field.

Both models can exist side-by-side in a port.

Located on the remote island of Phu Loi, Can Gio port loses its advantage in accessing the rich southern markets compared to existing port clusters.

An artists impression of Can Gio port in the future. Photo by Portcoast Consultant Corporation

An artist's impression of Can Gio port in the future. Photo by Portcoast Consultant Corporation

Can Gio can only target transshipment goods from other Southeast Asian countries.

The three megaports on the Strait of Malacca account for 54% of the region's throughput and all transit hubs of the world's largest shipping lines (around 51 million TEUs a year).

The challenge for Can Gio is how to capture the flow of ships from these superports, especially Singapore and Tanjung Pelepas, which have modern technology and are part of a dense network of sea connections.

Ports in the Strait of Malacca serve as major hubs not only for Southeast Asia but also for goods to and from the Middle East, South Asia, Oceania, and Africa.

According to our recent survey of the international container shipping network, these three ports account for 68% of the weekly shipments of MSC, the world leader in global container shipping, and 51% of CMA-CGM (number three) in Southest Asia.

It should be emphasized that Singapore’s TUAS mega port, which was built in 2022 and will be fully completed in 2040, with a total value of $14 billion and a capacity of 40 million TEUs to maintain Singapore's leading position.

Over $3 billion has also been planned for a third expansion phase from now through 2030 to double Tanjung Pelepas' capacity.

Located far from the Strait of Malacca (616 nautical miles - 1.5 days of travel), Can Gio is completely at a disadvantage compared to Singapore or Malaysia's Tanjung Pelepas for Eurasian or intra-Asian cargo flows, as the cargo journey from Thailand's Laem Chabang (LCB) to Can Gio will be 442 nautical miles longer.

LCB currently ranks 22nd in the world, higher than all Vietnam's port clusters, and handles 80% of Thailand's container cargo. With such a scale, LCB is obviously an important gateway for shipping lines. It is not easy for Can Gio to attract transit goods from here.

The advantage for Can Gio lies in the trans-Pacific (TP) shipping lane since it is situated 531 nautical miles closer to the U.S. west coast than Singapore and Tanjung Pelepas.

MSC, a potential investor, holds a global market share of 19%, but only 13% of the TP route.

The total capacity in Southeast Asia related to MSC is 22 million TEUs, but will not exceed 3.5 million TEUs on the TP route, quite far from the design level of the Can Gio project (10-15 million TEUs).

The Southeast Asian port market belongs to six countries: Singapore (33%), Malaysia (24%), Vietnam (15%), Indonesia (10%), Thailand (9%), and the Philippines (7%). In the period between 2010 and 2021, Vietnam had the most impressive output growth of over 10% per year.

Shipping lines have increased their presence at Vietnamese seaports to ensure access to this increasingly important market. MSC clearly does not want to stay out of the game after many competitors (such as Maersk Line, CMA-CGM, ONE) set foot in the Cai Mep cluster in Vietnam’s southern coast.

With its huge capital and capacity, if the port project is successfully implemented, Can Gio will become a blockbuster in the world transportation industry.

However, the role of a super port is an oversized shirt for Can Gio considering the current structure of the regional market.

It should be added that most of the MSC hubs in the world have a capacity of less than two million TEUs, except for two important hubs in Singapore (MPAT terminal - 8.5 million) and Antwerp, Belgium (MPET terminal - 9 million).

The chances of Vietnam replacing Singapore as the main hub for MSC in the region are low, but we can provide them with a second hub next to Singapore, like Le Havre (France) in Europe (1.8 million TEUs). In this case the size and even the location of the project is something that needs to be reconsidered.

Turning a remote island into a "supermarket on the sea" is the dream of everyone operating in Vietnam's seaport and logistics industry.

But before developing new super-scale projects, the issues that need to be considered are how to optimally exploit the existing system, attract mother ships to call directly and upgrade transportation connections to reduce logistics costs and transportation time for import and export of goods.

*Dr. Tran Nguyen Khoi, or Tran Nguyen, is a lecturer and researcher with a focus on sea transport, port development and supply chain. He works at École de Management de Normandie in France and has many years of experience working in Germany and Singapore.

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