Hanoi (VNS/VNA) - The COVID-19 pandemic, logistic disruptions due to Russia-Ukraineconflict and compliance with regulations on illegal, unreported and unregulatedfishing (IUU) are challenges facing the seafood industry. 

However,analysts expected that the negative impacts are only temporary andopportunities for seafood processing and exporting enterprises are huge. 

Growth momentum

KISSecurities Corporation (Vietnam) said that stable global seafood demandprovides growth momentum for Vietnamese seafood processing and exportingenterprises.

Accordingto the Food and Agriculture Organisation of the United Nations (FAO), theglobal fish supply will increase by 32 percent in 2011-2030 to 204 milliontonnes, equivalent to a compound annual growth rate (CAGR) of 2.3 percent.

By2030, fish catches will be limited, and will be replaced by farmed fishinstead, the organisation added. Thereby, it is forecast that aquacultureoutput will reach 109 million tonnes, up 32 percent compared to 2018, when thecatches will be 95 million tonnes, equivalent to that of 2018. 

Keyproducts boosting the growth rate are tilapia, carp, tra andshrimp.

TheWorld Bank said that with global population and global GDP up by 20.2 percentand 17.4 percent, respectively, in 2010-2030, average fish consumption islikely to climb. Annual fish consumption per capita is expected to rise from17.2kg to 18.2kg during the period.

Realisingthe growth potential of seafood consumption, the Government wishes to maintainits leading position in the strategic development plan until 2030. 

Accordingly,Vietnamese seafood output is expected to reach 9.8 million tonnes, including 7million tonnes of aquaculture production and 2.8 million tonnes of catches. Thegrowth target of 14 billion USD by 2030 is much higher than that of 2021, whichwas 8.9 billion USD.

Since2021, the Prime Minister issued Decision 1408/QD-TTg approving the developmentof the seafood processing industry for the next ten years. In particular, toform a number of modern seafood processing corporations and enterprises, and todeeply integrate into the global value chain with a world-class managementlevel. 

Thesustainability of supplies will be higher thanks to competitive shrimp farmingfacilities and techniques.

“Thisis the golden time for the Government to shift focus to a value-orientedapproach by enhancing the value of each product,” said experts from KIS Vietnam. 

Thesecurities firm added that the free trade agreements (FTA) also create a stronggrowth driver for the seafood industry. By 2020, Vietnam had 14 FTAs ineffect, providing enormous opportunities to boost export turnover and offermore competitive products.

KISVietnam believes that the advantages of tariff reductions will helpincrease the competitiveness of Vietnamese seafood products in overseasmarkets.

Maximisingtax advantages from FTAs, the Government is expanding new generation FTAs suchas the Regional Comprehensive Economic Partnership (RCEP), the EU-Vietnam FreeTrade Agreement (EVFTA) and UK-Vietnam Free Trade Agreement (UKVFTA).

TheFTAs will certainly open new and large consumption markets for Vietnameseseafood exports, contributing to improving the competitiveness of the industry.

Challenges remain

Theseafood industry has great opportunities, but KIS Vietnam believes that thereare still risks that businesses in this industry must face. 

Fuelprices have soared since the conflict between Russia-Ukraine began at theend of February. 

Rawmaterial prices in 2022 will advance by 50 percent over last year, said KIS Vietnam.This will cause transportation costs to edge up or remain at high levels, whichcan hurt exporters with products shipped by CIF.

Forshrimp exporters, high freight rates will not be included in the averageselling price, as the average selling price of shrimp is already higher thanthat of competitors such as Ecuador, India and Indonesia.

Inaddition, there is compliance with regulations against IUU fishing. Four yearssince receiving the "yellow card", Vietnamese seafood export volumeto the EU market declined by 3 percent during 2017-2021.

In2022, the Government will come up with appropriate and effective solutions toquickly solve the "yellow card" penalty. Vietnam, then, can avoid therisk of receiving a "red card" and enjoy preferentialtariffs and institutional changes from the EVFTA.

However,if there is no improvement in the implementation of the recommendations, theEuropean Commission (EC) is unlikely to remove the "yellow card" forVietnamese seafood. The worst-case scenario is that Vietnam may be judged asnon-cooperative and will be subject to a "red card."

Thismeans the country’s seafood will be banned from being exported to the EU,causing a loss of nearly 500 million USD per year, according to estimates fromthe Vietnamese authorities. At that time, not only the EU but other markets canalso apply similar measures to Vietnamese seafood.

Big returns in Q1

Eventhough there are many risks and difficulties, especially rising fuel prices,seafood enterprises still recorded strong growth in profit in the lastquarter. 

VinhHoan Corporation (VHC) posted a profit after tax of 550 billion VND in the firstquarter of 2022, 4.2 times higher than that of the same period last year,according to its quarterly financial statement. This is its highest quarterlyprofit since the third quarter of 2018.

InApril, the company said that its revenue jumped 98 percent year-on-yearand 20 percent compared to the previous month. For the first four months,pangasius enterprises reported total revenue of over 4.9 trillion VND, up 88 percentover last year. 

Meanwhile,I.D.I International Development & Investment Corporation (IDI) saw a recordquarterly profit in the last quarter, with a profit after tax of 200 billionVND. 

Navico(ANV) also announced a profit before tax of 238 billion VND, up 3.2 times overthe same period last year.

Despitethe sky-rocketing freight rates, Navico still sets a target of 4.9 trillion VNDin revenue this year, a gain of 40 percent, and 720 billion VND in profitbefore tax, 4.8 times higher than in 2021.

MiraeAsset Securities (Vietnam) expect seafood enterprises to achieve outstandingbusiness results in 2022, with extraordinary corporate revenues and profit inthe second quarter.

However,it noted that the trend will gradually fade in the remaining twoquarters as 2021's low-priced inventory has been depleted and the new harvestwith higher costs will start at the end of the third quarter of 2022./.