Seafood export: Headwinds from COVID-19

Consumer behavior changes towards processed shrimp products will bolster Vietnam’s shrimp exports even post-pandemic. Photo: Quoc Tuan

Demand recovery in key markets

In 1H2021, Vietnam’s pangasius export value edged up 18% YoY to reach USD 788 Mn, driven by the US demand recovery of F&B services after the economic re-opening. Pangasius export volume returned to pre-COVID level, growing 19% YoY, in which export volume to the US rose 60% YoY. Similarly, shrimp export value went up 13% YoY to reach USD 1.7 billion because of the demand increase in major markets such as the US, the EU, and Japan.

Most seafood companies recorded positive growth in revenue and net profit in 1H 2021. Notably, Vinh Hoan Corporation (VHC) and Sao Ta Foods., JSC (FMC) achieved double-digit growth in revenue, mainly driven by exports to the US. However, VDSC said, soaring logistics costs would result in a lower increase in net profit for companies that export mainly to the US and the EU.

Selling prices on track to recover

Given the strong demand increase in the US, average selling prices of pangasius and shrimp have risen by 15% and 5%, respectively in 1H2021 from end-2020. With a 50% market share in pangasius export value to the US, VDSC has a positive view on VHC in 2022 backed by export prices, demand increase, and cooling-down logistics costs, despite facing short-term disruptions amid COVID-19.

In contrast, selling prices to the EU and China were flat. China has faced stricter COVID-19-related controls and inspection requirements on frozen food imports. This issue will be ongoing in 2H2021 due to new COVID outbreaks. In the EU market, pangasius selling prices remain low as Vietnam’s pangasius exports compete with many types of whitefish products whose prices have gone down. According to Kontali, 2021 domestic whitefish production is expected to reach 13 million tons, up 4% YoY while EU’s whitefish imports declined 17% YoY in 1H2021.

Positive factors to bolster shrimp demand

Apart from the demand increase, Vietnam’s shrimp will also take advantage of the difficulties of competitors as shrimp supply from India and Indonesia have been dampened by COVID-19 and hardly recovered before the year-end festival season, opening growth opportunity for Vietnamese producers. Moreover, the US Department of Commerce (DOC) has imposed a preliminary anti-dumping tariff of 7.57% on Indian shrimp. This tariff will facilitate Vietnam’s selling price competitiveness.

VDSC expected shrimp selling prices to rise faster than shrimp raw materials prices. According to AgroMonitor, shrimp raw materials prices are expected to be flat due to abundant shrimp production. Therefore, given the supply shortage of Indian shrimps and stable material prices, this stock company expected Vietnam’s selling prices and producers’ profit margin to rise in 2H2021.

In addition, consumer behavior changes towards processed shrimp products will bolster Vietnam’s shrimp exports even post-pandemic. According to McKinsey, US and EU consumers tend to cook more at home since the pandemic, resulting in rising demand for packaged and processed food. Vietnam’s processed shrimps are competitive, thereby benefiting from demand increase.

Given these tailwinds, VDSC had a positive view on FMC and Minh Phu Seafood., JSC (MPC) in terms of consumer demand, resulting from replacing India’s supply while maintaining exports to the EU and Japan. Moreover, FMC and MPC also focus on investment projects in an integrated value chain to grow sustainably in the long run.

Negative impacts on seafood supply in 2H2021

A difficult supply outlook for Vietnamese seafood has been further complicated by lockdown measures. Many seafood processing plants have had to close, and those that have been able to remain open must reduce operation capacity. Per VASEP, seafood export value declined 4% YoY in July after surging 15% to earn USD 4.1 Bn in 1H 2021. The headcount only accounted for 30 – 50% of the normal level since the remainders had quit or taken unpaid leave, causing capacity to shrink 50 – 60%. According to Undercurrent News, Vietnam’s pangasius export volume declined roughly 18% month-over-month in July. 

However, VDSC realized that many listed seafood companies would record positive revenue growth in July such as VHC and FMC, with an increase of 21% and 9% YoY, respectively. This is explained by the fact that the leading companies have enough resources to maintain production activities. 

According to AgroMonitor, in the first half of August, pangasius export volume plummeted over 30% YoY. Hence, VDSC expected that seafood companies would start to witness a sharp decline in exports from August onward. This company also said that this decline could likely be going in 4Q2021 as COVID-19 cases in Vietnam have not shown any signs of being controlled. However, If the epidemic is under control and companies could return to normal production in 2H2021, the seafood industry would look positive in 2022.