Euro depreciation creates difficulties for seafood exporters

A lot of seafood companies are now like cats on hot bricks, because the export prices of seafood products to the EU have been decreasing when the euro has lost 15 percent of its value against the dollar.

The dollar depreciation means that the exports to the EU will become more expensive, even though prices in dollars remain the same. Therefore, many EU importers have asked Vietnamese exporters to lower prices, or they will stop purchasing products.

Expenses up, sale prices down

The director of a seafood company based in HCM City remarked that, earlier this year, the price of tra fish sold to the EU was at $2.7 per kilo, while the price has dropped to $2.3-2.4 per kilo now, because importers have asked to lower prices due to euro depreciation. In early 2010, EU consumers had to spend just 1.87 euros to purchase one kilogram of tra fish, but now they have to spend more than $2.2 to buy the same volume, even though the price remains unchanged in dollars.

EU importers do not dare negotiate big import deals because they fear that prices will drop further. “Therefore, in order to be able to sell goods, we have to reduce prices,” the director added.

The euro has become weaker due to the debt crisis in European countries, but euro depreciation has been affecting exporters to the EU market too. Just within five months, the euro has lost 15 percent of its value against the dollar. To have enough dollars to pay exporters, importers must spend more euros.

Nguyen Van Ky, General Director of Agifish, maintained that it is the export price decrease that has forced tra material prices down in the domestic market, from 17,000 dong in the first quarter of 2010 to less than 16,000 dong.

Cao Thi Kim Lan, Director of Binh Dinh Seafood Company Bidifishco, also noted that the company must slash prices of many products to get enough jobs for the workshops. As the company exports 60 percent of its products to the EU, any minor changes will have a big impact on the company’s operation.

“The problem is that while all input expenses have increased from the previous year, export prices have gone down,” Lan concluded.

According to Lan, import prices of materials for domestic production have increased by 10-30 percent, while other expenses have also increased by 7-10 percent.

Eyeing non-traditional markets

According to the Vietnam Association of Seafood Exporters and Producers (VASEP), in the first quarter of 2010, the growth rate of exports to the EU market was 17 percent, lower than the general growth rate of the whole industry at 20 percent, and much lower than the growth rate of exports to other markets such as Japan, the US, Australia, South Korea and China.

“The weak euro and some other reasons have had a bad effect on seafood exports to the EU,” observed Truong Dinh Hoe, Secretary General of VASEP.

Pham Quang Dieu, Director of Agromonitor, a market survey firm, suggested that, in order to settle current problems, seafood companies will have no other choice than to export to newly emerging markets such as Bulgaria, Romania, Czech, or the Middle East and China.

Duong Ngoc Minh, General Director of Hung Vuong Company, also commented that Vietnamese enterprises should target Russia, the US and the Middle East. He argued that the Russian market has recovered strongly after the reforms in payment procedures. Meanwhile, the demand from the US will certainly increase after the oil spill, which has made domestic seafood volumes decrease.

Tuoi tre

Tags: Vietnam Seafood, Vietnam seafood exports