EU currencies making seafood export trouble half a world away
Importers of Vietnamese pangasius continue to cut back on orders and the value of exports for the year just ended (May) has slumped to USD 1.7 billion (EUR 1.5 billion), according to statistics released by Vietnam’s General Department of Customs. This is a 4 per cent year-on-year drop and is largely due to currency difficulties in import markets and tighter product specifications in Vietnam itself.
The main problem facing importers is that the euro has lost much of its value against the U.S. dollar in which pangasius exports are priced. Many importers stopped placing orders at the beginning of the year, postponing them until the conversion rate became better – it had eased a little since the beginning of the year, but there is now the Greek referendum result to take into account.
Another problem is processors who buy their raw material, as they have no farms of their own, are on the brink of financial stability. Many have stopped selling to Europe and switched their business to Middle Eastern countries, or even Brazil.
The Vietnam Association of Seafood Exporters and Producers (VASEP) stated that for the four months to May 15, the total revenue from pangasius exports fell by 9.3 percent to USD 544.8 (EUR 500) million compared with the same period last year.
During this period, the value of pangasius sales to the EU dropped sharply by 16 percent, to Mexico by 21 percent and to Colombia by 8 percent.
Although export turnover to China surged 46 percent and increased to Canada by 12.5 percent and to the United States by 8.8 percent compared with the corresponding period last year, these increases have not made up the shortfall.
According to VASEP, the value of pangasius exported to the United States crashed by a massive 23 per cent in January due to anti-dumping levies imposed on companies by the U.S. Department of Commerce. These levies, which can amount to several hundreds of thousands of U.S. dollars, must be paid in advance by the Vietnamese exporters regardless of whether any “dumping” is subsequently proven.
The rising value of the U.S. dollar also had importers hesitating to place orders even though they had already requested a price reduction, as the reduction was not covering the losses caused by the currency problems.
The average export price of pangasius to the United States, in the first quarter of this year fell by USD 0.05 (EUR 0.045) per kilogram compared with the same period last year.
VASEP said the difficulties in exporting to the United States, Vietnam’s biggest customer accounting for 22 percent of the country’s total exports, was a key reason for the drastic overall reduction in the pangasius price.
Meanwhile farmers have been forced to accept a cut of VND 200 (USD 0.0092, EUR 0.0083) per kilogram in the price they were being paid for their pangasius since the end of February. By the end of May, this was between VND 20,000-25,000 (USD 0.92-1.14, EUR 0.83-1.03) per kilogram – the lowest level so far this year.
In the EU, Vietnam’s second biggest importer, the export value in the first half of May dropped by 16 percent compared with the same period for the previous month. According to VASEP, pangasius exports to the European market are not expected to improve during the next few months.
Meanwhile, in a move that may help to restore Vietnam’s pangasius industry to something like its former glory, the Vietnamese government has announced that it is aiming to relinquish any “stakes” – commercial or otherwise – it held in the country’s seafood processing companies.
More recently it has also announced that it is removing the cap on foreign investment in companies listed on the country’s two stock exchanges. What this means, of course, is that companies now can have full international ownership which had not been possible before.
According to Vietnamese state television, the years of delay in removing the cap on foreign investment have frustrated investors from other countries keen to tap the potential of Vietnam’s private sector. The prospect of future Pacific and EU free trade pacts with Vietnam will make them want to tap this even more.