Seafood enterprises cope with difficulties in the second half of the year

Processing seafood for export. Photo: T.H

Earning nearly US$1 billion every month

According to the Vietnam Association of Seafood Exporters and Producers (VASEP), in the first six months of 2022, seafood exports grew impressively, reaching a turnover of approximately US$6 billion, up 40% compared to the first half of 2021.

This was a positive signal that Vietnam's seafood industry has gradually recovered from the Covid-19 pandemic and export growth has returned. Based on the current growth rate and context of supply and demand, it is forecast that Vietnam's seafood exports would reach US$9.5-10 billion this year.

Facing the outstanding growth of the seafood export industry in Vietnam, enterprises have quickly grasped market opportunities and promoted the export of aquatic products to break through and improve profits.

According to Ho Quoc Luc, Chairman of the Board of Directors of Sao Ta Food JSC, the revenue in the first six months was estimated to increase by 35% and profit by 45% over the same period last year.

The reason why the growth rate of profit was stronger than revenue was positive shrimp farming in the first half of the year, the cost of final products decreased while the selling price was good.

In recent months, India and Ecuador have exported a lot of shrimp to the US. Amid high inflation in the world's largest economy, people tend to save money, Indian and Ecuadorian shrimp have the advantage of low prices, putting great pressure on Vietnamese shrimp. It is forecast that shrimp exports to the US in the second half of the year will be difficult, American consumers tend to look for cheaper products while Vietnamese shrimp still have high prices compared to other countries.

However, Vietnam has many other markets to exploit such as Europe and Japan.

According to experts, the good growth of seafood exports in the first months showed the agility of Vietnamese seafood enterprises, who knew how to seize opportunities to increase exports. For example, inflation and the conflict between Russia and Ukraine are opportunities for pangasius in 2022. Many large markets such as the EU, US, and UK lack white fish, especially cod due to sanctions against Russia, many restaurants in these markets have had to remove cod from their menus. Pangasius has the opportunity to gain market share in these markets. Therefore, pangasius exports to the UK in the first half of this year spiked six times over the same period, exports to Spain increased nearly three times, to France, the Netherlands, Germany, and Belgium all increased 45-90%. In the first half of this year, Vietnam’s pangasius exports reached more than US$1.4 billion, up 83% over the same period last year and accounted for a quarter of seafood export sales.

Multiple options

According to experts, there are several challenges for seafood exports in the second half of the year. First is the scarcity of raw materials to ensure exports, followed by the increase in shipping charges and input costs. Gasoline prices have increased by more than 50% compared to the end of 2021. The increase in gasoline prices has led to a series of consequences during the period of economic recovery. This also means that a lot of manufacturing industries are facing difficulties, especially those where petroleum accounts for a large proportion of total input costs such as transportation and seafood processing. Thus, many businesses both operate and study the market to come up with reasonable policies to reduce production costs and keep the selling price at the most suitable level for their partners.

According to Le Hang, Deputy Director of VASEP's Training Center, the lack of raw materials for processing has affected export turnover. Shrimp export sales in June 2022 only maintained a modest growth of 7%, reaching US$450 million. Accumulated in the first half of 2022, shrimp exports reached US$2.3 billion, up 33% over the same period and accounted for 40% of total seafood exports.

According to a representative of Con Dao Seafood and Import-Export JSC, the increase in gasoline prices made the cost of a sea trip also go up. On average, the cost of a sea trip has risen to VND1-1.5 billion, accounting for 30-40% of the total cost, so fishermen leave their boats on shore. This directly affected the source of raw materials supplied to the seafood processing factory. The company has strengthened control over all production stages to minimize costs, and looked for alternative sources of raw materials to reduce production costs.

According to the leader of Sao Ta Food JSC, inflation makes demand unsatisfactory and consumption prices difficult to improve. The source of raw shrimp will decrease sharply because farmers are reluctant to release the second crop due to the potential disease.

Sao Ta's response strategy is to increase consumption in markets that match the company's strengths and have good profit margins. In 2021, Sao Ta managed 270 hectares of farming land only. In early 2022, Sao Ta added 52 hectares of farming land from the project assigned by Soc Trang province to its Khang An member company and by the end of 2022, another 203 hectares from the above farming area will be added.

Thus, by 2024, Sao Ta will cover more than 520 hectares of farming land, completing the target a year in advance. Sao Ta expanded the farming area, and increased the output of processed shrimp, so it was self-sufficient 30-40% of raw materials.

In 2022, many farms in provinces are struggling because of diseases on farmed shrimp, and even some units have to close. The shrimp farming area of Sao Ta also suffered from disease. However, because the biosecurity work was implemented thoroughly, harmful effects of the disease were under control. Price inflation and lack of raw materials are difficult problems for shrimp businesses in the current period. Small-size fresh, frozen white leg shrimp are still popular during this inflationary crisis. However, some seafood enterprises increased the proportion of value-added processed shrimp to export to high-end markets, such as Japan, the US, and the EU, to overcome the scarcity of raw materials.