Entry of foreign fuel: a game changer?

October 23, 2017 - 09:05

Earlier this month Idemitsu Q8 Petroleum LLC opened its first retail outlet in Hà Nội’s Thăng Long Industrial Park, marking the first time a wholly foreign-owned company has entered the fuel retail sector.

Earlier this month Idemitsu Q8 Petroleum LLC opened its first retail outlet in Hà Nội’s Thăng Long Industrial Park, marking the first time a wholly foreign-owned company has entered the fuel retail sector. — Photo soha.vn

Earlier this month Idemitsu Q8 Petroleum LLC opened its first retail outlet in Hà Nội’s Thăng Long Industrial Park, marking the first time a wholly foreign-owned company has entered the fuel retail sector.

Idemitsu Q8 is a joint venture between Japan’s Idemitsu and Kuwait Petroleum International Ltd.

It was the first to benefit from a landmark government decision last year to allow foreign businesses to distribute fuel in Việt Nam if they invest in oil refining in the country.

The entrance of Idemitsu Q8 has been welcomed as a positive change for the petroleum retail sector.

The modern new petrol pump has the best equipment from Japan, the latest management software and international standard service by well- trained staff.  

Idemitsu Q8 is soon expected to expand its retail network along Highway No.5, which links Hải Phòng and Hà Nội.

Market observers said the newcomer is like a breath of fresh air in the Vietnamese fuel retail market.

Its modern and service-oriented operation would benefit consumers and put pressure on domestic players to improve to keep up.

Some even fear that Idemitsu Q8 would soon take over the local market.

Thanks to the two partners’ 35.1 per cent stake each in the Nghi Sơn Refinery, the joint venture has an opportunity to establish a large fuel retail network in future.

But others do not agree with this assessment, saying it would not be easy for foreign retailers here.

They point out that major domestic retailers such as Petrolimex, PVOil and Sài Gòn Petro have a nation-wide network of outlets.

Petrolimex for instance has more than 2,500 pumps, many in prime locations around the country.

Besides, foreign players, despite their deep pockets, cannot compete on price like they do in other sectors, confident they can absorb possible losses, to undercut local competition. The fuel prices are still fixed by the Government.          

Việt Nam National Petroleum Group (Petrolimex) is the country’s biggest petroleum retailer.

Its deputy director, Nguyễn Quang Dũng, told the media that his company has been preparing for the entry of foreign retailers for dozens of years.

With its nation-wide retail network and 50-year experience, Petrolimex is ready for a fair and transparent competition, he said.

To create a retail network similar to Petrolimex’s, time, location and opportunity are also needed rather than just plenty of resources, he said.

Analysts said for many years foreign companies have been eyeing the Vietnamese petroleum retail market because they believe it is still very promising.

The entry of major foreign energy retailers is expected to make the market more transparent and fair.

VN shipping, logistics attract foreign investors

On the first day of October Gemadept Corporation completed a sale of majority stakes in its two subsidiary firms to Korea’s CJ Logistics Corporation.

The company said it sold 50.9 per cent in Gemadept Shipping Holding Co Ltd and Gemadept Logistics Holding Co Ltd, reducing its holdings to 49.1 per cent in each.

The divestment is part of Gemadept’s restructuring plan and was approved at its annual shareholders meeting in May.

The proceeds will be used to pay dividends to shareholders.

CJ Logistics, previously known as CJ Korea Express Corp, is looking for opportunities to acquire logistics firms in Southeast Asia and become one of five largest logistics firms, especially in Việt Nam.

In the last two years, it has bought major stakes in logistics firms in Malaysia, China, Dubai, and India.

Early last year another South Korean company, Samsung SDS, an information and communications technology and logistics firm belonging to the Korean conglomerate, entered the Vietnamese market through a joint venture with Aviation Logistics Service.

The Samsung SDS website last week said it plans to establish a joint venture in Việt Nam and boost its presence in the Southeast Asian logistics market.

This is the second joint venture in Southeast Asia for Samsung SDS following one it established last month with Thailand’s leading customs clearance company, ACUTECH.

The acquisitions by foreign companies in the Vietnamese shipping and logistics market come at a time when many local firms are struggling and making losses. 

For instance, the Việt Nam Ocean Shipping Joint Stock Company (Vosco) used to be the country’s leading shipping company, but it has piled up losses of VNĐ974.3 billion over 10 consecutive quarters up to the second quarter of this year.

The Orient Shipping Service and Trading Joint Stock Company has been deep in debt since 2012.

Analysts attribute these to the sharp decline in freight charges, of up to 90 per cent, and a scarcity of cargo.

A simultaneous oversupply of vessels has led to fierce competition between shipping companies, causing freight charges to fall by 30 per cent, and even 50 per cent in some cases, from a few years ago.   

According to the Việt Nam Maritime Administration, last year the country’s shipping fleet of 1,840 ships with a total tonnage of 7.3 million DWT transported a total of 54.2 million tonnes of cargo, a year-on-year fall of 4 per cent.

The fleet has been transporting about 90 per cent of cargo domestically, but only 10-12 per cent of imports and exports.

The vessels lack the technical capability to carry certain cargo, offer a high standard of services or for long voyages and so do not ply on high-priced routes. 

The domestic fleet only has a 20 per cent market share as a result.

But the domestic shipping and logistics sectors also have certain advantages, which make them attractive to foreign investors.

Despite the problems, the shipping registered 4 per cent growth last year.

The results are expected to be better this year and in the coming years thanks to opportunities in the domestic market with more and more thermal power plants going on stream, industrial parks and processing zones being built and construction booming on Phú Quốc Island.  

The logistics market is expected to grow by 15-20 by 2025 and contribute 8-10 per cent of GDP.

The rapid growth in Việt Nam’s export-oriented manufacturing sector has boosted demand for logistics services but local players have largely failed to meet this demand and foreign enterprises are therefore see big opportunities in the sector.

Besides, growth in the shipping and logistics industries reply much on trade, and Việt Nam’s trade is expected to do well in 2017-20 thanks to the raft of free trade agreements it has signed and will take effect.

Foreign shipping and logistics companies are keen to take advantage of this, analysts said. — VNS