Russia-Ukraine conflict expected to greatly impact seaport enterprises

Thursday, Mar 10, 2022 08:39

Loading containers on a boat at Hai Phong Port. — VNA/VNS Photo An Dang

Rising international oil prices, due to tensions in Ukraine, will have a great impact on the shipping industry as input costs increase in tandem.

Experts predict that the Russian-Ukrainian tensions will have a small direct impact on Viet Nam. Indirectly, however, rising oil prices due to sanctions on Russia from other countries is a concern.

Brent crude has maintained its rallies in recent weeks and topped US$130 a barrel earlier this week.

In the short term, with higher freight rates, the seaport industry could benefit. In the long term, however, the global economic recovery and smooth international trade are factors that help the seaport industry develop sustainably.

The conflict is a short-term event and may reduce freight rates as the situation cools down.

And even though seaport and logistics businesses will transfer the additional cost to customers, their profit margins will decrease and not all customers will agree with the extra fees.

In addition, prolonged escalation reduces the workload for the industry, due to the decline in international trade.

However, growth in import and export is a driving force that creates a potential for port and shipping enterprises. As a result, shipping stocks have surged recently.

Flying high

Stocks in the shipping industry have climbed sharply recently, especially on March 3 when many hit ceiling prices.

Statistics showed that from March 3 to 7, Gemadept Corporation (GMD), Vietnam National Shipping Lines (MVN), Vietnam Ocean Shipping JSC (VOS), and Hai An Transport & Stevedoring JSC (HAH) all gained for three consecutive sessions, with MVN posting the biggest increase of 37.23 per cent.

These stocks’ rallies ended on Tuesday as geopolitical tensions in Ukraine weighed on the market’s sentiment. However, they all rebounded strongly yesterday despite the market’s general downtrend, with GMD, VOS and HAH even hitting a maximum intra-day gain of 7 per cent.

VNA shares of Vinaship JSC also marked rallies for 15 consecutive sessions, from February 11 to March 3, with an increase of 51.4 per cent. The stock corrected on March 4 and 7, before surging back sharply in the last two sessions.

The rallies happened amid oil prices hitting record highs, showing that investors still have high expectations for the industry.

Analysts say that seaport businesses are benefiting from the economic recovery and reopening of countries around the world.

Do Ngoc Bao, Deputy General Director of Viet Nam Construction Securities JSC (CSI), said that the seaport stocks have risen sharply in recent sessions thanks to the strong cash flow into industries that are believed to benefit from the Russia-Ukraine tensions, of which the shipping industry is said to benefit from higher freight rates and surges in the price of a variety of goods and materials.

However, these stocks have had a positive recovery over the past month or so, with most stocks approaching and surpassing the peaks formed last year, he added.

Meanwhile, Tran Xuan Bach, a market analyst of Bao Viet Securities JSC (BVSC), said that shipping shares have increased sharply in recent sessions due to China's “zero COVID-19" policy and tensions between Russia and Ukraine, adding pressure on global trade and exacerbating supply chain bottlenecks.

Momentum from import and export activities

Although shipping stocks are closely related to import and export activities, they are one of the brightest points of the Vietnamese economy.

According to the General Department of Viet Nam Customs, in 2021, the country's total import and export value reached $668.55 billion, up 22.6 per cent on-year.

In the first two months of this year, Vietnamese total import and export turnover was estimated at $108.52 billion, up 13 per cent over last year. Of which, export turnover increased by 10.2 per cent, while import was up 15.9 per cent.

Agribank Securities Joint Stock Company (Agriseco) said that although the macroeconomic background in 2021 was not quite positive due to the effects of the fourth wave of COVID-19, there were still many bright spots, especially after the pandemic was brought under control.

One of these bright spots was the growth in exports. Despite the developments of COVID-19, the export turnover still grew by nearly 19 per cent last year.

Exports are expected to continue to grow well in 2022 as COVID-19 is well contained and international demand recovers strongly. — VNS

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