With projects cancelled, delayed or just plain difficult, last year was a tough one for the Southeast Asia region – in that, it was not alone of course. However, heavy lift and project cargo specialists in the region are optimistic about the coming months, with Vietnam taking a starring role in the bounce back. Felicity Landon reports.

The economic impact on Southeast Asia from Covid-19 has been huge and comparable to the region’s 1997 financial crisis, according to Elmer Sarmiento, president and ceo of Philippines-based Royal Cargo.

Unsurprisingly, the pandemic also impacted the company’s project cargo and heavy lift business. “Industries temporarily halted their operations due to selective lockdowns, workers partially stopped reporting for work, financial closures to fund constructions were postponed, ports have operated partially, and contracts and the execution of signed contracts were delayed,” he said.

“Several projects were cancelled, postponed and delayed due to the pandemic. A wind farm project was cancelled in the Philippines, partly because of the pandemic, a hydropower plant was delayed in Vietnam, a railway project in Indonesia was postponed.”

Uptick expected

However, while 2020’s work was basically around existing contracts, he said, the project business is building up and an uptick is expected soon. “I expect a better and an improved business situation by the second half of 2021 and in 2022. Delayed contracts will push through, cancelled contracts will be renegotiated and reviewed, and new projects will be envisioned. We have seen railway, road and bridges, LNG and renewable energy projects being undertaken now having an upswing.”

Pressure will be on the service providers to meet these requirements [for restarting projects]. We are investing in new equipment to meet these demands. – Elmer Sarmiento, Royal Cargo

In fact, he said, as the delayed projects that have built up start to move again, “pressure will be on the service providers to meet these requirements. We are investing in new equipment to meet these demands.”

Felix Chen, business coordination assistant manager at Dimerco Express Group in Taiwan, said: “Our base scenario is that Covid-19 is contained globally over the next few months. This allows the global economy and dry cargo demand to rebound in 2021.” After a dip last year, it is hoping to see a 7.4 percent rebound in multipurpose shipping activity in 2021, depending on further Covid-19 waves. “Generally, bulk shipment imports and breakbulk – mostly produce and equipment related to manufacturing – look to be increasing in the second half of 2021.”

Chen said recovery in individual Southeast Asian countries would remain weak and incomplete as long as the domestic spread of the virus was not under control. On the positive side, he said: “Southeast Asia’s electric vehicle and battery industries are quickly building momentum, as manufacturers in Thailand and Vietnam scale-up production and high-profile foreign investors such as Tesla and Nissan show increasing interest. There is likely to be a continued strong pick-up in global demand if major economies are able to remain on the recovery path.”

Demand from the USA will be particularly important, boosted by President Biden’s USD1.9 trillion fiscal stimulus, he said. Meanwhile, a notable trend, said Chen, is for more Chinese companies to establish offices in Singapore, apparently to hedge against any further deterioration of relations between China and the USA, while there are also cases of Chinese companies moving entire production lines to Southeast Asia.

The USA-China trade war continues to deliver changes, said Christophe Grammare, commercial director of AAL Shipping. “According to a study conducted by Boston Consulting Group, in the next few years two-way trade between the USA and China and the EU and China will shrink by USD128 billion and USD30 billion respectively.”

The global trade map not only changed exponentially during the height of the USA[1]China trade war, but it may be changing for the long term. China-USA and China[1]Australia tensions have forced EPCs to consider alternative sources for their manufacturing. “As a result, we have seen increased manufacturing of modules or project cargo in Thailand in 2020/2021. Vietnam has also been an expanding producer and exporter of wind tower components all over the world – indicative of a geo-shift in the sourcing of renewable energy components away from China.”

Grammare added: “It is fair to say that the Southeast Asia region has the potential to be one of the biggest winners arising from the China-USA trade war.”

Read the full article from the May/June 2021 edition of HLPFI here.