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Seafood exporters confront too many difficulties   2010-05-25 - Saigon tiep thi

Higher input material prices, rising shipping costs and rising electricity, water and fuel prices have brought huge challenges for seafood export enterprises.

In the first five months of 2010, Vietnamese companies exported $1.63 billion in seafood products, fulfilling 35 percent of the yearly plan to obtain $4.5 billion. Though the five month export turnover is encouraging, increasing by 18 percent over the same period of 2009, enterprises admit that majority of the turnover came from last year’s orders.


Seafood companies all complain that they face too many difficulties. Tran Thien Linh, Director of Thuan Phuoc Seafood Company, cited that everything is getting more and more expensive, from capital costs, shipping fees, electricity, water and fuel prices, and higher worker salaries. He claimed that the increases have eaten into the company’s profits.


In 2009, Thuan Phuoc Company borrowed money from banks at the average interest rate of 0.53 percent a month, because it could enjoy the four percent interest rate subsidy program. When the subsidy program ended in 2010, the company had to borrow more money at higher interest rates. February and March interest rates surged to 1.6-1.7 percent per month.


Nguyen Thanh Dam, General Director of Bac Lieu Seafood Company, agreed that the additional costs have made production costs rise by 6-8 percent. Meanwhile, they cannot raise prices in accordance with the higher costs of input materials. If they do, the company will not be able to compete with those in India, Indonesia or Thailand.


“For the last half a year, Bac Lieu has been trying to maintain production to provide enough jobs for its workers, but it has no profits,” Dam complained.


Input materials, which account for a big proportion of seafood production costs, have been soaring. Le Van Quang, Chair of Minh Phu Seafood Company, noted that shrimp prices increased by 30 percent over 2009, while the supply is more scarce.


Nguyen Van Ky, General Director of Agrifish An Giang, also observed that the tra price has increased by 11 percent, making finished products less competitive.


Regarding the January export prices, according to Ky, European customers paid $2.6-2.7 per kilo, but they now pay only $2.4. With such prices, no enterprise can profit.


Seafood companies agree that cutting expenses may be the only solution.


“Previously, Agrifish tried to keep many factories, but now we have restructured to cut management costs plus electricity and water fees,” Ky explained. “We have re-organised production shifts to avoid running lines during peak hours, which allows us to save on electricity. We also cut down expenses for guests.”


He went on to say that the company has stopped making 20 out of a total of 50 products that cannot bring high turnover.


Agromonitor, an analysis and forecast firm in Vietnam, has suggested that in order to cope with difficulties, seafood companies should diversify their export markets by trying to penetrate new ones in the Middle East, South America or China. Regarding the EU market, the firm thinks that Vietnamese enterprises should shift to potential markets that like Vietnam’s tra fish, like Sweden, Luxembourg, Bulgaria, Slovenia, Romania, Estonia, Hungary and Slovakia.

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