Vietnam Overseas

Monday, 13 October 2008

In tandem with scrap prices elsewhere in the region, those in Korea have continued to drop largely because inventories of imported scrap in steelmakers’ yards are still high. Yet domestic prices of steel products – notably rebars – remain stoically unchanged, Steel Business Briefing hears from industry sources.

Posco Specialty Steel, based in Changwon in southern Korea, cut its scrap purchase prices by KRW 30,000/ton ($24/t) on 13 October. The steelmaker’s new price for Shindachi grade is now around KRW 460-480,000/t ($372-388/t).

Meanwhile Daehan Steel, a mini mill based in Busan, also reduced its scrap price by KRW 20,000/t ($16/t) from same day as the special steelmaker. Though Daehan would not reveal its new scrap buying prices, a company official admits to receiving many inquiries asking when it might reduce its rebar price given the decline in scrap. Daehan plans to keep its product prices unchanged. Its rebar list price is currently KRW 1,031,000/t ($834/t).

Korean steel consumers are unhappy that the steelmakers are not passing on their lower costs, SBB hears. “The current rebar price rose higher until summer by the steelmakers blaming higher input costs such as scrap,” one industry watcher notes. “Now, even though the scrap price has been falling, rebar prices remain unchanged,” he grumbles.

Of the big, major casino projects I’ve seen announced over the past year or two, this one looks to be the most advanced since they actually have a real live website. Seriously though, you have to look at who is involved in this project. Those familiar with casino designs realize that Paul Steelman is one of the heavyweights, and if you look at the Ho Tram Strip’s Advisors and Consultants, you’ll see two of the Fontainebleau guys - Glend Schaeffer and Jeffrey Soffer.

The Ho Tram Strip’s Project 1 is being designed by Las Vegas architect Paul Steelman, and being developed by Asian Coast Development (Canada) Ltd. (ACDL).

Project I of the Ho Tram Strip will feature two luxurious five star hotels with 2300 rooms and Vietnam’s first Las Vegas-style casinos. The 180 table, 2000 slot casino will include live entertainment stages and an exclusive VIP area, just like you’d find in Vegas or the Cotai Strip.

Many recreational options will be available for guests, such as an expansive and luxurious spa, state-of-the-art performance facilities, an engaging upscale retail experience and a wide selection of elegant dining facilities offering local and international cuisine.

The Ho Tram Strip’s website gives the following construction timeline:

Construction of Project 1 (Phase 1 and 2) - including the two five-star hotels, Vietnam’s first Las Vegas-style casinos and the specially designed Greg Norman golf course – is scheduled to commence in the second half of 2008 and be completed by 2011. The entire 157 hectares of the Ho Tram Strip, featuring five Las Vegas-style integrated resorts, is scheduled to be completely developed and operational within ten years.

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FACT SHEET FROM COMPANY’S WEBSITE:

PROJECT FACT SHEET – THE HO TRAM STRIP § Asian Coast Development (Canada) Ltd. (ACDL), a privately held Canadian-based luxury resort developer, is the lead developer of the Ho Tram Strip, a multi-phase resort development project in Vietnam south of Ho Chi Minh City. § ACDL secured a 50-year lease agreement with the Vietnamese government for 169 hectares located on three kilometres of beach-front surrounded by forestry preservation reserves near Ba Ria-Vung Tau Province.

§ On May 22, 2008 ACDL was awarded an investment certificate by the government of Vietnam that allows for construction to begin on the planned $4.2 billion, 9,000-room luxury hotel resort and entertainment destination.

§ Phase 1 of the project – a five-star hotel resort with 1,100 rooms, a championship golf course designed by PGA legend Greg Norman, and Vietnam’s first Las Vegas-style casino – is slated to open in the fall of 2010.

§ Phase 2 – a second luxury resort with 1,300 rooms, a casino, and 10 restaurants and nightclubs – is scheduled to open in late 2011.

§ The entire complex, located 80 km south west of Ho Chi Minh City on the South China Sea, is scheduled to be completed within 10 years.

§ The Ho Tram Strip will offer the largest variety of resort amenities in the region, including:

- An entertainment complex boasting five integrated resorts; Fully appointed convention center; World-class entertainment pavilion; Seaside marina complex; Celebrity branded Tennis Academy; Two ferry terminals; A 18-hole Greg Norman designed Golf Course; Fine dining restaurants; luxurious spa; holistic wellness center; full-service gym; boutiques and name-brand retail stores

§ The 169-hectare Ho Tram Strip is being designed by Steelman Partners, one of Las Vegas’ premier architectural firms.

Two events dominated the economic landscape in the last six months, namely Vietnam’s accession to the WTO and a dramatic boom in the stock market. Both events pose policy challenges for the government in the short- and medium-term, with the stock market already having attracted substantial short-term attention. GDP grew by 8.2 percent in 2006 with industrial value added increasing by 9.8 percent and services 8.3 percent. Within the industrial sector, the turnover of the domestic private sector expanded 23.9 percent while that of state-owned enterprises (SOEs) grew 9.1 percent. The retail sales index grew by 20.9 percent in 2006 about the same as 2005. Implemented investment, which is different from the national accounts measure, is estimated at nearly 41 percent of GDP, growing 22.4 percent over 2005 in nominal terms. The investment share of the domestic private sector has risen from 23 percent in 2001 to 34 percent in 2006. FDI commitments, boosted by imminent WTO accession, surged to 10.2 billion dollars well above its 2005 level of 6.2 billion and surpassing the peak level of 9 billion in 1996. FDI commitments for 2007 have already reached 1.9 billion dollars.

Inflation trended down through most of 2006 reaching 6.6 percent in December, and 6.5 percent in February 2007. The moderation in prices resulted from both food and non-food components. The government has announced its intention to move towards market based pricing for petroleum products, steel, cement, coal, paper, and fertilizer. For gasoline such price adjustments have already become more market based. Electricity prices were raised by an average of 7.6 percent in January 2007, though low income households were shielded. Looking ahead, price pressures remain, as evidenced by the recent rise in steel and cement prices.

Export growth in 2006 stood at 22.8 percent about the same level as in the previous year. Exports of seafood, garments, and footwear were particularly strong, the latter despite of an antidumping suit in the EU. Import growth picked up in 2006 largely due to capital goods, in particular machinery and equipment for the Dung Quat oil refinery and industrial zone. The net result of these trends was a small trade surplus. With tourism and remittances remaining buoyant the current account is expected to have recorded a surplus of 1 to1.5 percent of GDP. Inflows of FDI and ODA were also robust. ODA inflows reached 1.8 billion dollars while inflows of FDI, as recorded in the balance of payments, are estimated to have surpassed 2 billion dollars. Portfolio inflows also picked up in line with investment opportunities being offered by the growing domestic capital market. As a result foreign exchange reserves have seen a rapid rise: by end-December reserves had increased to over 12 billion dollars (11 weeks of next year’s imports) compared with 8.6 billion dollars at end-2005. The National Assembly ratified Vietnam’s accession to the WTO in November, 2006 and the country was admitted in January 2007. In December, Vietnam was also accorded permanent normal trading relations (PNTR) or unconditional MFN by the US. Vietnam’s tariff structure will witness major changes. The average tariff will decline from a current level of 17.4 percent to an average final bound of 13.4 percent. Average agricultural tariffs are to decline from 23.5 percent before accession to a final bound of 21 percent while industrial tariffs will fall from 16.6 to 12.6 percent. Tariff cuts are to be phased-in over periods ranging from 3 to 12 years, with most occurring within five years. On the services side, Vietnam will grant full trading and wide ranging distribution rights to foreign firms; it will allow 100 percent foreign owned banks; and will also significantly open up telecommunication services.

Fiscal revenues grew by 20 percent compared with 2005 and exceeded budgeted levels. Revenues from crude oil exports were buoyed by high international prices. Tax revenues from the private sector continue to rise, reaching 50 percent of non-oil revenues in 2006, up from 36 percent in 2001. On the expenditure side, minimum wage hikes have become an important contributor to the increase in recurrent outlays in the last three years. Minimum wages for state employees have been raised by a cumulative 214 percent since January 2003, the latest increase in October 2006. The minimum wage hike is also a basis for the adjustment of government pensions and other social security payments. The adjustments are designed to eliminate the minimum wage gap between domestic and foreign invested sectors by 2010 as part of international commitments. The budget deficit is estimated to have declined from 1.2 percent of GDP in 2005 to 0.7 percent in 2006. On-lending of ODA receipts to project implementing enterprises or agencies is expected to have attained 1.2 percent of GDP in 2006. Other items which contribute to public or publicly East Asia Update 2 April 2007 guaranteed debt, but are not included in the definition of the budget deficit amounted to 2.8 percent of GDP in 2006. Including these items, public debt is estimated around 44 percent of GDP at end-2006, a level considered to be within manageable limits.

Stock market capitalization surged from under 0.5 billion dollars in December 2005 to 13.8 billion (22.7 percent of GDP) by December 2006, and then to a current level of 24.4 billion. The number of listed firms rose from about 40 to nearly 200 at present. December alone witnessed more than 100 new listings as firms rushed to avail of tax incentives to be withdrawn in 2007. The stock price index shot up 144 percent in 2006 and has already seen an additional increase of 50 percent in the first two months of 2007. The market is set to expand further with 20 large state owned enterprises scheduled to list in 2007. The boom has inevitably led to concerns that stocks are being overvalued by inexperienced investors. The median price-earnings ratio stood at 21 in early 2007, with about a quarter of the firms over 30. It is estimated that foreign stock holding is of the order of 4 billion dollars. The authorities have for now put to rest rumors that capital controls would be imposed in a bid to slow down foreign inflows or outflows.

However measures have been announced to enhance disclosure by companies, clamp down on insider trading, and to limit bank lending against stocks. Credit growth slowed from around 32 percent at end 2005 to 21 percent by mid-2006, but ticked-up somewhat to 25 percent by November 2006. The slower growth in 2006 was mainly attributable to more cautious lending by state owned banks as they adhered to stricter prudential standards. Lending from joint stock banks (JSBs) on the other hand grew by nearly 40 percent. Base money growth in 2006 was driven almost entirely by foreign inflows which were incompletely sterilized by the SBV. On the policy front, a new regulation stipulates that all joint stock, joint venture and foreign invested banks need to have a chartered capital of 1 trillion dong by 2008 and 3 trillion dong by 2010. For SOCBs a minimum chartered capital of 3 trillion dong is required by 2008. After nearly 15 months since the PM’s decision to equitize Vietcombank and Mekong Housing Bank, the consultants to advise on the process have been hired. Under current plans the banks will conduct initial public offerings in the fourth quarter of

SCRAPPING of aging ships that carry coal, iron ore and other commodities may rise because of an increase in new vessel deliveries starting this year.

Only eight dry-bulk ships were scrapped globally last year while 88 new vessels were delivered, resulting in a 2.6% increase to 3,164 ships across the world, Precious Shipping managing director Khalid Hashim said in a filing to the Thai stock exchange

Precious Shipping is Thailand’s biggest sea transportation company by market value.

The Baltic Dry Index, an overall measure of commodity shipping costs, rose to a record in November and more than doubled to 7,070 points last year from 2006.

The strength in bulk-shipping rates has discouraged shipping lines from scrapping aging vessels.

“It is impossible to escape the conclusion that for the most part, the ever greater age of more and more ships will lead to an upswing in deletion rates in the near future, regardless of the profitability of the underlying markets,'’ he said.

For cape-size ships with 175,000 tonnes cargo capacity, Hashim said 13% of the supply would be more than 22 years old and were likely to be scrapped during 2008 to 2011 should freight rates reached low enough levels.

A total of 47 new cape-sizes are scheduled for delivery this year, 139 in 2009 and 263 in 2010.

He said a total of 436 panamax-size vessels of 70,000 tonnes capacity each were contracted for delivery from 2008 through 2010.

“About 228 ships will be over 24 years by 2011 and may be scrapped between 2008 and 2011,” he said.

He added that some 1,141 smaller handy-size ships would exceed 27 years old by 2011 and would be likely be removed for demolition this year through 2011 should freight rates drop sharply.

About 332 new handy-size vessels will be delivered between 2008 and 2010. Handy-size ships can each carry 10,000 to 39,999 tonnes of cargo.

“Precious Shipping will need to sell or scrap 26 of its ships, which are more than 20 years old, over the next five to seven years,” said Hashim.

The Bangkok-based shipping company has 44 ships and has contracted to acquire 18 new ones from ABG Shipyard Ltd, India’s biggest shipbuilder.

“We will continue to be on the lookout for the right opportunities for additional fleet renewal as we would like to achieve an annual fleet strength of between 50 and 70 ships within the next few years,'’ he said.

He said Precious Shipping had obtained credit facility from a group of local and international banks amounting to US$500mil, which it can use to purchase second-hand vessels. – Bloomberg