Clear Risks of Seafood Production and Export Chain Disruptions

8:39:48 AM | 9/24/2021

Vietnamese aquatic products have been exported to over 170 countries and territories in the world, including demanding markets such as the EU, the United States, Japan, South Korea and Australia, and are being expanded. However, at the moment, there is a clear risk of seafood production and export chain disruptions which are reportedly causing serious impacts on export value and markets.

Most exports sink

After more than a month of mobility restriction, social distancing and “three on the spot” business model, aquatic exports in August plunged 36% from a year earlier to US$520 million, clearly showing severe impacts on the fisheries industry. Key exports sank.

However, driven by high-growing exports in the first seven months of the year, cumulative seafood exports in the first eight months still rose by 7.1% year on year to US$5.58 billion. Specifically, shrimp exports grew 4% to nearly US$2.4 billion; pangasius exports expanded 7% to US$980 million; tuna exports climbed over 10% to US$460 million. Squid and octopus exports and other aquatic shipments increased slightly by 2% and 4%, respectively.

According to a survey conducted by the Vietnam Association of Seafood Exporters and Producers (VASEP), in the past two months, only 30-40% of southern seafood companies have been capable of ensuring “three on the spot” working conditions and managing to mobilize 40-50% of their workforce for production, because the output capacity declined to just 40-50%.

Input supply chains are disrupted and transportation is slowed. Companies lost customers due to long delayed delivery, input shortage for production, delayed import and export procedures, increased input costs and freight costs. These are mounting difficulties for Vietnamese seafood companies in the context of the Covid-19 outbreak.

According to VASEP, shrimp processors in Ca Mau, Soc Trang and Bac Lieu provinces, the three largest shrimp producers, cannot sell their products, buy baby shrimps and harvest adult shrimps because social distancing is being applied to prevent Covid-19 as per Directive 16. Factories slashed their processing capacity by 60-70% because they lacked workers and costs increased.

Since late July 2021, up to 50% of pangasius processors in some Mekong Delta provinces had to close operations or downscale the capacity. In some pangasius producers, due to the prolonged farming time and high density, a lot of fish are dead every day. The operating capacity of the pangasius industry is forecast to decline to just 10-20%.

After closing their production facilities, some companies in the Mekong Delta used their stocks to fulfil customers orders. However, so far, most processors have run out of both inputs and finished products in stock. As a result, they have stopped completely.

In coastal provinces like Binh Dinh, Phu Yen, Khanh Hoa, Ba Ria - Vung Tau and Kien Giang, most enterprises have scaled down their processing capacity. Both farmers and businesses are facing a lot of difficulties because some fishing ports are locked down due to Covid-19 infections. The rate of vaccinated workers is very low and the cost of “three on the spot” is too high.

Vaccination and localized medication

Covid-19 epidemic development is forecast to be still tense in southern provinces, especially in Ho Chi Minh City and some Southeast provinces, in the coming time. Meanwhile, vaccination for workers in industrial parks and export processing zones is still modest and uneven. Hence, the picture of seafood production and export in September is still lackluster.

Before this reality, VASEP sent a request to the Prime Minister and the Minister of Agriculture and Rural Development for some solutions for production and business stabilization after the "three on the spot" phase.

The "three on the spot" measure is just temporary, usually lasting just 2-3 weeks for medium enterprises and 4-5 weeks for larger ones, because they have to spend a lot to ensure manufacturing and epidemic prevention in their facilities at the same time. For that reason, VASEP proposed vaccinating seafood workers as quickly as possible, with higher priority of vaccination given to workers in "three on the spot" factories.

In the long term, VASEP hopes the Ministry of Health will complete a set of rules and provide training for provinces and businesses to exercise localized medication.

While coordinating and sharing with centers for disease control and prevention (CDC), enterprises will actively use medical staff to test workers twice a month. Test samples will be sent to health agencies and test results will be applied for mobility and transaction. CDC will test their workers once a month, thus ensuring that each worker is tested thrice a month.

The Ministry of Health has guidelines for enterprises to promptly handle emerging matters like new infections, medical quarantine, disinfection and testing to control infections to reduce losses incurred by enterprises and ensure workers' livelihoods.

In addition, VASEP proposed supporting workers in trouble and supporting enterprises which need realistic support policies such as lower interest rates on bank loans, 30% reduction in electricity bills until the end of 2021, and reduction of union dues from 2% to 1% of the salary fund.

Seafood exporters are forecast to see a decline of at least 20% (to US$660 million) in September. Hopefully, most seafood factory workers are vaccinated after September and companies will lift the "three on the spot" business measure. Exports are projected to slightly recover to reach US$8.5-8.6 billion in the year, of which shrimp exports are forecast to account for US$3.9-4 billion, pangasius for US$1.5 billion and seafood for US$3.1 billion.

Source: Vietnam Business Forum