Hanoi (VNS/VNA) - The growth momentum of the seafood industry islikely to slow down in this third quarter due to the rising pressure ofproduction and transportation costs, while purchasing power in major markets isexpected to decrease.

The seafood industry witnessed a strong recovery after being affected by theCOVID-19 pandemic.

In the first seven months of 2022, seafood exports earned nearly 6.7billion USD, a gain of 35% year-on-year.

The Vietnam Association of Seafood Exporters and Producers (VASEP) expectedthat in 2022, seafood export turnover can exceed the target of $10 billion, anincrease of 12-15% over last year.

However, Nguyen Hoai Nam, deputy general secretary of VASEP, told tinnhanhchungkhoan.vnthat businesses are still suffering from the impact and consequences of thepandemic, while high inflation weighs on purchasing power in the country’sseafood consumer markets and higher aqua feed prices.

Production costs and shipping costs are two main pressures that seafoodbusinesses are facing, Nam added.

Of which, production costs, or the high price of aqua feed in particular,causes the price of Vietnamese seafood products to pick up, reducingcompetitiveness with other countries' products. The expenses of animal feed forpangasius and shrimp account for 65-70% of the cost.

Meanwhile, shipping and labour costs have both increased over the past twoyears due to issues related to COVID-19, port congestion and soaring fuelprices. The cost of a container going to the US West Coast is currently about 400million VND (17,054.68 USD) and going to Europe is 10,000-12,000 USD. Othercosts such as packaging and chemicals also increased.

Cash flows and credit tightening since the beginning of August are otherproblems for the industry.

Nam said that some major markets of Vietnamese seafood, such as the US and theEuropean Union (EU), record high inflation, meaning consumers have to limitspending, and the purchasing power of seafood was at risk of decline.

Many importers announced that they do not have orders from now until the end ofOctober. Therefore, businesses are unlikely to have enough cash flow to repaybank loans. And without paying old debts, they will not be able to borrow newloans, affecting purchasing activities of shrimp and fish.

Possibility of deceleration

The business picture in the first seven months of 2022 showed positive growth.

In July, the Vinh Hoan Corporation’s revenue reached nearly 1.2 trillion VND,up nearly 13% month-on-month and 48% on-year. 

Many other seafood enterprises recorded big profits in the first six months of2022 such as the Sao Ta Foods JSC with 161 billion VND in profit, up 42%, whileNavico’s profit of 447 billion VND, 5 times higher than the same period lastyear, and I.D.I International Development & Investment Corporation’s profitwas up 2% to 391 billion VND.

However, the story is different in the third quarter of 2022, as VASEP expectedit to slow down, with the total export turnover expected to reach about $3billion, lower than in the second quarter.

One of the reasons is the scarcity of raw materials for shrimp and seafood.Meanwhile, world shrimp demand is forecast to be less positive in the lastmonths of the year.

A leader of a seafood export business said that recently, orders have startedto slow down, and consumers' purchasing power is affected by exchange ratefluctuations in the EU, while in the US market, people gradually tightenspending. Some importers reported delayed delivery time of 3-5 months.

Shrimp and pangasius are two key export products of Vietnam’s seafood industry,but difficulties and challenges are inevitable when feed prices are gettinghigher and competitive pressure emerges from some markets. Recently, China shutdown to prevent the spread of COVID-19. As Ecuador and India could not exportshrimp to this market, they sold to the US, Canada, Japan, and EU markets.

Even though China has reopened the border, there is still a large amount ofshrimp from the two markets, causing Vietnamese shrimp exports to suffer. Inthe US, Vietnam’s seafood exports in July to this market decreased by 23% overthe same period last year. 

Regarding fish feed, if in 2020, a 25kg bag of bran cost 330,000 VND, now ithas increased to 420,000 VND, while the selling price of much commercial fishhas not risen.

With pangasius products, despite favourable market demand, the supply of rawpangasius is not stable.

Chairman of the Vietnam Pangasius Association Duong Nghia Quoc said thatpangasius of 0.8 - 1 kg a fish can be exported to the US and EU for 28,000 -29,000 VND per kg, pangasius of 1.1 - 1.3 kg a head has an export price of 27,000VND a kg. The prices are significantly higher compared to the cost, so manyfarmers are hesitant and slow to raise the new crop because it is difficult toearn the desired profit.

According to the Center for Analysis and Investment Advice under SSISecurities, seafood inventories in the main export markets, especially the US,are at a high level due to the large import volume in the first half of 2022.In line with inflationary pressure, seafood exports may decelerate in the thirdquarter of this year.

VNDIRECT Securities Company forecasts that the gross profit margin of the lasttwo quarters of 2022 of the pangasius and shrimp producers may shrink./.