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Vietnam Cargo Rates to Rise as Smaller Shipping Lines Fail, Gemadept Says

Gemadept Corp. (GMD), Vietnam’s biggest listed freight company, expects local cargo rates to rise from mid-2012 as the failure of smaller rivals eases competition.

“Many shipping companies are trying to stay alive, so they have reduced fees to very low levels,” General Director Do Van Minh said in a Sept. 14 interview in Ho Chi Minh City, where the company is based. “The market will be much better when weaker ones have been filtered out.”

Local shipping lines have also been hit by a slump in volumes as higher interest rates have caused manufacturers to curb production, Minh said. Across Asia, shipping lines are also struggling with higher fuel costs, overcapacity and lower demand to carry flat-screen TVs, furniture and sneakers to the U.S. and Europe because of the economic slowdown.

Gemadept fell 2.5 percent to 23,500 dong on Sept. 16. The stock has fallen 29 percent this year, compared with a 5.7 percent decline in the benchmark VN Index of the Ho Chi Minh City Stock Exchange.

The shipping company’s pre-tax profit from its main business activities may reach 170 billion dong ($8.2 million) in 2011, compared with the target of 160 billion dong set in May after the annual shareholder meeting, Minh said. The figure was 93 billion dong in the first half, he said.

“The business situation may improve slightly in the third quarter,” he said.

Minh declined to forecast a net income figure, saying it will also depend on the company’s investments in stock market. In the first half, profit fell 74 percent to 21.5 billion dong, according to the company website.

Container Terminal

Gemadept is also building a deep-sea container terminal in southern Vietnam with CMA CGM SA. The facility will be operational by the end of 2013.

Vietnam’s exports last month fell to $8.3 billion from a revised $9.32 billion in July, according to preliminary figures from the General Statistics Office in Hanoi.

The central Bank’s repurchase rate stands at 14 percent, compared with 7 percent in November, after increases designed to tackle inflation. Still, consumer prices rose 23.02 percent in August, the fastest pace in almost three years.

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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