Fuel retailers struggling amidst rising costs, market challenges

Vietnamese fuel retailers are facing severe difficulties due to low profit margins, rising costs, and difficulties in obtaining supplies.

In the afternoon of October 7, several fuel businesses in HCMC and other provinces reported extremely low or even zero discounts. As of 6:00 p.m. on October 7, these discounts ranged from VND40-500 (US$0.02) per liter, depending on the storage facility, with some even offering zero discounts.

However, it takes a discount of around VND1,000 ($0.04) per liter to be sufficient to cover costs like premises and employee salaries, allowing businesses to make a profit. In addition, retailers analyzed that with low discounts at the warehouse, coupled with transportation costs of VND150-170 ($0.007) a liter per 100km, businesses would incur losses with every sale.

A leader of a fuel retail chain in HCMC and Long An Province sadly mentioned that their gas stations had lost billions of VND on October 7.

Hoang Kim Lap, owner of Tan Hoa Fuel Terminal in Buon Ma Thuot City, said that fuel retailers are facing great difficulties due to the sharp decline in discounts. Even with a recent layoff of many employees, he is still enduring a loss of VND30 million ($1,200) a month.

Sharing the same situation with Lap is Nguyen Xuan Thang, Director of Hai Au Phat Petroleum Co. in Lam Dong Province, who informed that the discount from fuel distributors to retail businesses at Nha Be Warehouse (HCMC) has dropped to zero.

More worrisome, besides low discounts, retailers also find it difficult to place orders. Therefore, if the situation of insufficient merchandise continues, after a few days of running out of inventory, gas stations will have to close.

Director Thang commented that currently, the company's gas stations have a temporarily sufficient supply, but if the supply is dripped like in the past few days, there will not be enough fuel to sell to consumers after 3-4 more days. One of the reasons, according to him, is that the wholesalers are hoarding goods, waiting for price adjustments.

At a recent meeting, the Ministry of Industry and Trade stated that in the last 4 months of this year, the two oil refineries, Nghi Son and Binh Son, are expected to produce about 6.6 million m³/tonne of various types of petroleum, along with the import volume of about 3.6 million m³/tonne.

Meanwhile, the projected consumption volume for the last 4 months is over 8 million m³/tonne (about more than 2 million m³/tonne/month), with inventory from 1.8 to 2 million tonnes.

According to Deputy Director Nguyen Thuy Hien of the Domestic Market Department (Ministry of Industry and Trade), if there are no unexpected factors, the supply of petroleum this year is sufficient to meet the production, business, and consumption needs of the people.