Shipping operation of Northern Shipping Joint stock Company

Shipping operation of Northern Shipping Joint stock Company

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I Overview about Northern Shipping Joint stock Company

1 History and Development progress

Northern Waterway Transport Corporation (hereinafter referred to as NORWAT), the precursor of Northern Shipping Joint stock Company (hereinafter referred to as NOSCO), was established on the Decision No 1108/QĐ-TCCB-LĐ dated June 3rd 1993 issued by Minister of the Ministry of Transport At that time, NORWAT was directly under Vietnam Inland Waterway Administration

NORWAT became a member of Vietnam National Shipping Lines (hereinafter referred to as VINALINES) according to the Decision No 598/TTg dated July 30th 1997 issued by Prime Minister Then it was renamed to Northern Shipping Company on the Decision No 219/QĐ-HĐQT dated April 1st 2004 issued by General Director of VINALINES In November 28th 2006, Minister of the Ministry of Transport approved the plan of transforming Northern Shipping Company into Northern Shipping Joint stock Company (NOSCO) on the Decision No 2581/QĐ-BGTVT

In July 8th 2007, after an experiment period of privatization, NOSCO arranged the opening turn of Shareholders’ Meeting and completed the procedure for starting the business Since August 1st 2007, NOSCO has officially started to operate as a joint stock company

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Hội đồng quản trị

Ban Tổng giám đốc Ban Kiểm soát

Văn

phòng

HĐQT

Văn phòng TGĐ

Phòng TCCB-

LĐ

Phòng Kinh tế đối ngoại

Phòng Tài chính

kế toán

Phòng Vật tư

Phòng

Kỹ thuật

Phòng Pháp chế - an toàn

Văn phòng Đảng đoàn

1 thành viên ĐT-CƯ

nhân lực

Nosco

Công ty TNHH

1 thành viên XNK Đông Phong

Xí nghiệp Vận tải thủy Nosco Quảng Ninh

Công ty

CP Vận tải Biển Bắc chi nhánh tại Hải Phòng

Trung tâm xuất nhập khẩu CKD

Trung tâm Du lịch và Thương mại Hàng hải

Trung tâm Thuyền viên

Xí nghiệp xây dựng và sửa chữa tàu biển Nosco

Phòng Đóng mới

Nhà máy sửa chữa tàu biẻn Nosco -

Vinalines

Ban quản lý các dự

án công

ty

Source: nosco.com.vn

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3 Operations and Businesses

3.1 Shipping and other Maritime services

3.1.1 General information

Operating as a shipping company, it is obvious that shipping plays the most important role in all NOSCO’s business activities Recently, shipping alone often accounts for more than 70 percent of NOSCO’s annual revenue

In its very first days, NOSCO focused on inland transportation by running old and small steamers on familiar local routes After a couple of years, as this activity could not earn enough for the whole staff, NOSCO soon decided to shift its focus from inland operation to maritime transport It also started to manage other maritime services with the purpose of supporting fully and adequately for shipping activities as well as making more profit to improve the living standard for its staff

The following are some NOSCO’s major maritime services, not to mention the main function of Shipping/Maritime transport, at the moment:

 Ship owning, Ship management and Ship operation

 Ship brokering and chartering, Ship sale and purchase

 Deadweight tonnage (hereinafter referred to as DWT)

DWT is a measurement of total contents of a ship including cargo, fuel, crew, passengers, food, and water aside from boiler water It is expressed in long tons of 2,240 pounds or an equivalence of 1,016.05 kilograms

11 NOSCO’s vessels have the total DWT of around 230,000 MT, which

is estimated to be fourth biggest within VINALINES Of those vessels, five of

them have the shipping capacity of more than 20,000 MT each The biggest

vessel of NOSCO is MV NOSCO GLORY with its DWT reaching 68,591 MT

The smallest one is MV NGOC HA whose DWT is 3,760 MT

1 MV QUOC TU GIAM 1985/Japan Dry cargo 7,015 5,512 2,223

2 MV THIEN QUANG 1986/Japan Dry cargo 6,130 4,096 2,212

3 MV LONG BIEN 1989/Japan Dry cargo 6,846 5,506 2,273

4 MV EASTERN SUN 1993/Japan Dry cargo 22,201 13,706 7,738

5 MV EASTERN STAR 1994/Japan Dry cargo 23,724 14,431 8,741

6 MV NOSCO GLORY 1994/Japan Bulk carrier 68,591 36,074 23,452

7 MV NOSCO VICTORY 1996/Japan Bulk carrier 45,585 26,060 14,872

8 MV NOSCO PEACE 2003/Japan Bulk carrier 26,384 15,850 9,110

9 MV NGOC HA 2004/Vietnam Dry cargo 3,760 2,498 1,462

10 MV NGOC SON 2004/Vietnam Dry cargo 6,500 4,095 2,448

11 MV HONG LINH 2007/Vietnam Dry cargo 12,500 8,280 3,985

(Sources: nosco.com.vn and Introduction Catalogue)

 Gross tonnage and Net tonnage (hereinafter referred to as GT and NT)

GT is a measurement of total capacity expressed in volumetric tons of

100 cubic feet or an equivalence of 2.831 cubic meter It is calculated by adding

the under-deck tonnage and the internal volume of twin-decks and deck space

used for cargo The measurement is used in assessing harbor dues and canal

transit dues for merchant ships

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NT is the tonnage of a vessel after a deduction from the gross tonnage has been made, to allow space for crew, machinery, etc The measurement is applied in assessing port-authorities-related dues

(Source: shipbuilding.net)

NOSCO fleets’ total GT and total NT are approximately 38,500,000 cubic meter and 22,230,000 cubic meter respectively Individual figures basically follow the order of DWT It means that MS NOSCO GLORY has biggest figures with its GT and NT respectively standing at around 10,200,000 cubic meter and 6,650,000 cubic meter while the smallest one is MV NGOC

HA with around 700,000 cubic meter of GT and 415,000 cubic meter of NT

 Average age

At the moment, 11 vessels of NOSCO has the average age of 15.1 years

It is considered a fairly old average age for a fleet Among those vessels, three

of them were constructed in 1980s with the oldest one MV QUOC TU GIAM

being built in 1985 Four vessels were built in 1990s and the rest four were constructed during 2000s The youngest vessel is MV HONG LINH, which was built in 2007

3.2 Other businesses

Aside from shipping operation and maritime services, NOSCO is operating in some other services Despite their minor contribution to company’s annual turnover, these operations are very important for NOSCO to develop sustainably, create more jobs and assure a good payment for the staff Some of these operations are:

 Multi-modal transportation

 Passenger carrier by inland waterway, road and seaway

 Import and export material, steel cargo, apparatuses, etc

 Consign sale and purchase; and consign agency

 Concrete and commercial manufacture

 Labor export

 Tourism services

 Real estate business

 Guest house services (stay and office for lease)

4 Analysis on the competition

Globally, as shipping is an enormous business, NOSCO definitely have to compete with a numerous number of other shipping companies around the world, especially on its familiar routes Considering the world scale, NOSCO’s contribution to world shipping industry is very little

However, since NOSCO is a member of VINALINES, whose shipping volume accounts for the major part of Vietnam annual shipping volume, NOSCO could be considered one of the biggest shipping company in Vietnam

It is obvious that NOSCO’s domestic competitors are mostly other shipping companies belonging to VINALINES As mentioned above, NOSCO owns the

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fourth biggest fleet within VINALINES, led by the fleets of Vietnam Ocean Shipping Joint stock Company (VOSCO), Vietnam Petrol Shipping Joint stock Company (FALCON) and Vietnam Sea Transport and Chartering Joint stock company (VITRANSCHART) Other competitors from VINALINES are Dong

Do Marine Joint stock Company (DONG DO), VINASHIP Joint stock Company (VINASHIP), etc

Apart from internal competitors, NOSCO has many domestic rivals outside VINALINES Those potential rivals might come from Vietnam Maritime University (like Eastern Dragon Shipping Company - EDS), directly under Ministry of Transport (like The Transport and Chartering Corporation – VIETFRACHT) or formerly belong to VINASHIN (like Bien Dong Shipping Company)

II The shipping operation of NOSCO

1 Real situation at NOSCO

1.1 Business results in recent years (2007-2010)

1.1.1 Shipping volume

 There are two indexes measuring shipping volume They are:

 Transport volume Transport volume is a figure showing the actual amount of goods shipped annually In order to calculate a company’s shipping volume, we just simply

add up the transport volumes of individual vessels in that year

Unit of measurement: Ton or T in abbreviation

 Rotation volume Rotation volume of a vessel for each journey is calculated by multiplying the amount of goods shipped with the voyage length Therefore, rotation

volume of a vessel in one year is the sum of all single rotation volumes of that

vessel during that year Summing up all individual vessels’ rotation volume in

one year we will have the company’s rotation volume for that year

Unit of measurement: Ton x Kilometer or TKm in abbreviation

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2010

Transport volume T 2,000,000 1,650,000 82.5% 69.3% Rotation volume TKm 12,000,000,000 13,363,000,000 110.8% 127%

(Sources: Tài liệu báo cáo Đại hội cổ đông thường niên 2009, 2010, 2011)

Overall, NOSCO’s annual transport volume maintains at fairly high level

of more than one million tons of goods per year From 2007 to 2009, transport

volume saw an increasing trend with 2009 became a breakthrough with the

growth index of transport volume reached 183%, standing at nearly 2.5 million

tons However, this number does not describe exactly the situation at that time

As 2009 was the peak of the global financial crisis, NOSCO had to try their best

and exploit all their ability to do business to cope with the problem of crisis It

is the reason why there was a sudden and significance rise in transport volume

of 2009 Then in 2010, as the situation became easier, NOSCO came back to

normal rhythm of growth, resulting in a decline in transport volume

Unlike transport volume, rotation volume saw a consistent trend of

increasing during this period Each year, NOSCO’s fleet increase the total

rotation volume by around 3 or 4 billion of TKm, showing the sustainable

growing ability, reliability and safety of the fleet Even in 2009, although

transport volume rose sharply, rotation volume still remained a moderate speed

of increase It showed the flexibility and reasonability of NOSCO in negotiating

and signing shipping orders at that time

The table above shows a small problem of NOSCO The trouble is that

NOSCO could not fulfill its planned goals in recent years Although the gaps

between estimated targets and actual figures were not too big but these

differences reflect the limit of NOSCO in suggesting closer goals

(Sources: Tài liệu báo cáo Đại hội cổ đông thường niên 2009, 2010, 2011)

Generally, NOSCO’s total revenue was often at high level of more than

750 billion of VNĐ per year After 2007 revenue starting out at a low of around

350 billion of VNĐ, 2008 saw a great increase in total revenue to 1,027 billion

of VNĐ, marking a growth index of 286.3% Since then, as the world crisis

negatively affected the whole global economy, NOSCO’s total revenue fell

considerably in 2009 before recovering slightly in 2010

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As shown in the table, in recent years, shipping revenue often accounted

for more than 70 percent of NOSCO’s total turnover, showing the importance of

NOSCO’s key business Overall, annual shipping turnover of NOSCO followed

the general fluctuation of total revenue reflecting the general economic

situation It is the reason why, as 2009 saw the toughest year of the crisis

making the shipping price greatly decrease, 2009 shipping revenue was far

lower than 2008’s figures despite its records of volume shipped

Unlike annual targets for volume, the yearly goals for revenue, in both

general term and shipping term, were more reasonable The figures above

shown that annual goals for revenue were effectively fulfilled recently Since

financial term is one of the ultimate goal of every business, this shows a strong

operating situation of NOSCO Moreover, NOSCO’s shipping operation seemed

Being guided by the fluctuation of global economy during this period, NOSCO’s annual profit before tax followed the order of total revenue and shipping revenue for the corresponding year Despite its modest revenue, the profit of 2007 was much higher than the figures for 2009 and 2010 It is due to the economic stability and the low rate of inflation in that year It is not a surprise that 2008 profit reached the peak with the growth index of more than 200% A small trouble happened as the actual operations were often inconsistent with the planned goals This problem is mostly due to the hard-to-predict economic situation during the period as the global crisis occurred

NOSCO’s annual payment to state budget also got involved in this trend

of fluctuation Therefore, as 2008 was the splendid year in NOSCO’s operation, payment in 2008 was highest during the period Then is declined sharply in

2009, suffering from crisis, before recovering partially in 2010

Unlike other criteria, the average salary for NOSCO’s staff remained stable for the whole period There were just some trivial changes in workers’ salary during these years Furthermore, the actual salary was very close to what

is planned This fact reflects the great effort of the whole company in trying maintaining good payment levels for its staff

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Other main goods carried by NOSCO’s fleet are chemicals, cement, structural steel, etc These kinds of goods is the core of the process of construction, production and development of every country all over the world Therefore, it is no doubt that the needs for these goods are very big Then it is the opportunities for shipping companies like NOSCO to take part in to deliver these products around the world

1.3 Main routes

Overall, as China is called “the workshop of the world” and Indian economy is emerging very quickly, these two countries becomes the main destination for many ships all over the world, including NOSCO’s fleet

Aside from two Asian giants above, since more than a half of NOSCO’s fleet (actually 6 out of 11) are vessels with the DWT less than 20,000 MT, these ships’ main routes are quite short up to medium length More clearly, these so-called small ships mainly function within Asia, especially the home routes around Southeast Asia For bigger vessels with the DWT more than 20,000 MT, they are able to carry out the longer journey Besides China and India, these ships can take long trip to South America or U.S

For the remaining part of the world, because the number of ships is limited and NOSCO have not set up many familiar clients then NOSCO’s ships rarely come to these areas like Europe or Africa