Sourcing from Vietnam could shift as costs and restrictions rise, warn businesses
The sourcing shift to Vietnam will go into reverse if severe lockdown measures don’t end ...
French 3PL FM Logistic is expanding its footprint in Vietnam, building a new 52,000 sq metre warehouse near Hanoi.
The investment highlights the country’s rapid trade growth, driven in part by a US-China trade war which now looks set to resume in earnest.
Work on the $30m multi-client facility broke ground last month, with the first phase of 21,000sq metres expected to be completed by spring 2020.
Located in Bac Ninh, 20km from Hanoi, it will have storage space for 70,000 pallets, and serve customers in the food, retail, FMCG, industrial, cosmetics and e-commerce sectors.
FM Logistic entered the Vietnamese market in 2017 with ambitions to be a leading contract logistics player within three years, and Hamza Harti, country managing director for Vietnam, told The Loadstar: “The logistics growth, and especially the warehousing market, is booming.
“There’s a lot of growth from consumer goods companies, mainly FMCG, but also cosmetics and e-commerce.”
He said the battle between Vietnam’s three biggest online retailers, Lazada, Shopee and Tiki, was fuelling the demand for warehousing, and added: “And now many international investors are entering the warehousing market, whereas before it was mainly domestic players.”
Total foreign direct investment increased by 28.6% to $7.4bn in the first four months of this year, nearly 10% of which has gone into real estate, according to official figures.
“The occupancy of warehousing space is very high in Vietnam, particularly in industrial parks surrounding Ho Chi Minh City and Hanoi,” explained Mr Harti. “Real estate agents are expecting a shortage of warehousing space within the next five years.”
Demand could increase further if US tariffs push more manufacturers out of China. President Donald Trump announced on Sunday, via Twitter, that the 10% tariffs on $200bn of Chinese goods would rise to 25% on Friday.
The increase, originally planned for January, had been put on hold as trade negotiations between the two sides progressed. However, it appears talks have again broken down.
High-profile names that have announced some production shift from China to Vietnam include footwear manufacturers Adidas and Brooks Running, while Taiwanese iPhone supplier Foxconn has reportedly acquired industrial property in the north.
“We’ve had much more significant enquiries from Chinese companies that want to switch their manufacturing base from China to Vietnam,” said Mr Harti.
For FM Logistic, the focus remains on domestic distribution, and Mr Harti said imports for many customers were growing at double-digit rates, some as high as 40%, creating transport and warehousing challenges.
“This is one of the reasons why we believe our warehousing strategy will answer these demands, because it allows customers to increase their space year on year,” he explained.
FM’s new facility will offer multi-temperature storage, handling, co-packing and other value added services, and will increase the company’s Vietnam warehousing capacity tenfold.