Material shortage forces Minh Phu to target more self-supply

Published on
November 21, 2019

Vietnamese shrimp giant Minh Phu is working to increase the share of its own supply to lessen the negative impact of a material shortage that has affected its export totals.

Unfavorable weather conditions, including prolonged heat and heavy rains in Mekong Delta, have adversely influenced shrimp farming in Vietnam’s most important farming region this year. In Bac Lieu Province, farmers have been unable to farm in shrimp ponds spanning about 8,000 hectares since the start of this year, according to Vietnam Industry and Trade Information Center (VITIC).

Due to a shortage of supply, prices of whiteleg shrimp in Bac Lieu went up by around VND 25,000 (USD 1.08, EUR 0.98) per kilogram to VND 160,000 (USD 6.9, EUR 6.24) per kilogram for 30/40 count in early November compared to three months ago. But many local traders said they could not purchase with needed volumes as before despite higher prices, VITIC said.

Minh Phu’s business performance has been hit by this material shortage in recent months, which prompted its management to act. Last week, the company decided to invest in increasing its production capacity at its major shrimp farm of Minh Phu Loc An in southern Vietnam. On 16 November, the company’s board of directors approved the plan to increase the charter capital of its wholly-owned subsidiary Minh Phu Loc An by VND 240 billion (USD 10.4 million, EUR 9.4 million) to VND 720 billion (USD 31 million, EUR 28 million).

The funds will be used to build a system that will store seawater for the farm in Ba Ria-Vung Tau Province, which will aid Minh Phu Loc An to harvest between four and five crops per year, up from the current two to three crops per year, Minh Phu Chairman and CEO Le Van Quang told SeafoodSource Wednesday, 20 November.

The new system will help raise the quality of the shrimp being produce and will reduce production costs, Quang said.

In June, the CEO said Minh Phu plans to begin raising shrimp via its new shrimp farming technology- the “2-3-4 technology” method, in all 1,500 ponds in Minh Phu Loc An in 2021. Construction activities on the 302-hectare farm are already underway. According to Quang, the company is beginning production in each pond once it is finished, with a total of 554 new technology ponds being put into operation by early 2020.

This year, Minh Phu aims to produce 5,760 metric tons (MT) of shrimp in “2-3-4 technology” ponds and 10,760 MT in traditional ponds from Minh Phu Loc An.

In Kien Giang Province, Minh Phu is planning to begin raising shrimp in about 1,000 ponds in 600 hectares there by 2021. It also targets to open more than 4,000 ponds across 2,500 hectares in the province by 2025, Quang said. 

Nonetheless, in the short-term, the shortage of material has made it difficult for Minh Phu to deliver cargoes to customers, specifically in October, when the company exported 5,979 MT of shrimp, down 20.76 percent year-over-year. The volumes of its signed export contracts fell 51.6 percent in October, to 1,707 MT.

Through the remainder of the year, the company will focus on fulfilling signed contracts, but will “take a careful consideration to sign new contracts” due to costly material prices, Minh Phu said.

Minh Phu exported 49,442 MT of shrimp between January and October, down 10.65 percent from last year. Its signed contract volumes in the period were 54,667 MT, down 19.24 percent, which was worth USD 609.93 million (EUR 551.2 million), down 17.4 percent.

In October, Minh Phu earned USD 65.5 million (EUR 59.2 million) from exports of shrimp, going down nearly 19 percent year-on-year, mainly from the U.S. with USD 27.59 million (EUR 24.92 million), down 20 percent; Japan with USD 13.97 million (EUR 12.6 million), 10.8 percent lower year-on-year; E.U. with USD 5.54 million (EUR 5 million), down 3.65 percent; South Korea with USD 2.99 million (EUR 2.7 million), down 42.9 percent; and other markets with USD 15.41 million (EUR 13.9 million), down 21.8 percent year-on-year.

In the first 10 months, Minh Phu earned USD 550.06 million (EUR 496.97 million) from shrimp exports, down 10.25 percent from the same period last year. U.S. remained its biggest buyer in the period but the export value fell 15.1 percent to USD 215.91 million (EUR 195 million). The other markets which saw a decline included Japan with USD 109.8 million (EUR 99.2 million), down 12.2 percent and South Korea with USD 31.14 million (EUR 28.13 million), falling 19.9 percent.

The European Union was the only major destination that Minh Phu saw its export value rise between January and October of 2019. Minh Phu exported shrimp worth USD 64.8 million (EUR 58.6 million) to the bloc in the first 10 months, up 17.3 percent year-on-year.

Its exports to other markets in the period accounted for USD 128.41 million (EUR 116 million), a decrease of 9.5 percent.

Photo courtesy of Minh Phu

Reporting from Hanoi, Vietnam

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