After two years of trading tensions, Vietnam discovering renewed interest in Chinese market

Vietnam has set lower seafood production and export goals for 2023, acknowledging the toll inflation has taken in denting global demand.

However, China’s State Administration for Market Regulation's announcement of the end of testing chilled and frozen foods for Covid-19 at ports of entry beginning 8 January, as reported by Reuters, has given Vietnamese exporters renewed hope for better-than-expected trading environment in the year to come. China is also no longer requiring imported chilled and frozen foods to enter centralized warehouses for disinfection and testing before being released into the domestic market, according to Reuters.

Vietnam’s General Department of Fisheries has outlined a cautious approach in its 2023 planning. It is estimating gross national seafood production to drop to 8.74 million metric tons (MT) in 2023, down 2.9 percent year-on-year. That total includes 5.16 million MT of farmed output, up 0.7 percent from 2022, and nearly 3.58 million MT of wild-caught production, down 6.8 percent year-on-year.

Vietnam exported an estimated USD 11 billion (EUR 10.5 billion) worth of seafood in 2022, up 24 percent year-on-year and the largest total in its history, according to the Vietnam Association of Seafood Exporters and Producers (VASEP), which estimates the total makes Vietnam the world’s third-largest seafood exporter by value after China and Norway.

Export values for of all three of Vietnam’s key seafood commodities hit all-time highs in 2022, with shrimp hitting around USD 4.3 billion (EUR 4.1 billion), pangasius touching USD 2.4 billion (EUR 2.3 billion), and tuna reaching more than USD 1 billion (EUR 952.6 million).

Vietnam’s seafood sales to the U.S. rose 5 percent year-on-year in 2022 to an estimated USD 2.1 billion (EUR 2 billion), followed by China (including Hong Kong) at USD 1.8 billion (EUR 1.7 billion) in sales – up 59 percent. Japan was Vietnam’s third-largest market overall with USD 1.7 billion (EUR 1.6 billion) in purchases, up 28 percent, and the E.U. finished the year as Vietnam’s fourth-largest market, with USD 1.3 billion (EUR 1.2 billion) in seafood purchases, up 20 percent year-on-year.

However, following weak November sales, Vietnam’s seafood exports took a dive in December 2022, dropping 13 percent year-on-year to around USD 785 million (EUR 747.8 million). Vietnam’s total seafood sales to the U.S. and E.U. fell 40 percent and 32 percent year-on-year in December, respectively. Shrimp sales abroad contracted 21 percent year-on-year to USD 260 million (EUR 247.7 million), pangasius sales plunged 23 percent to USD 166 million (EUR 158 million), and tuna sales shrunk 22 percent to USD 68 million (EUR 64.8 million) in December.

VASEP forecasted Vietnam’s seafood exports will continue to fall through the first quarter of 2023, with a recovery in global demand coming in the second half of the year. As a result, VASEP said expects the country’s seafood export value will decline around 9 percent to USD 10 billion (EUR 9.5 billion) in 2023.

“Currently, orders from customers have dropped sharply, with many seafood businesses having not received orders for delivery in the first quarter of 2023,” VASEP Chief Communications Officer Le Hang said. “We hope that from the second quarter or at least the second half of 2023, market demand will recover, then we will have a momentum to boost exports again.”

The inflation-ravaged U.S. and E.U. markets are not expected to provide much of a boost for Vietnam’s seafood exporters in 2023, but China (including Hong Kong) is emerging as the most-favored market for growth, particularly after the full reopening of its borders following the harsh restrictions it imposed during the pandemic. In December, China was Vietnam’s only major market that increased its seafood imports from Vietnam – rising 17 percent year-on-year.

Through the first 10 months of 2022, Vietnam shipped USD 1.38 billion (EUR 1.31 billion) worth of seafood to China, up 84.9 year-on-year. Shrimp accounted for 41 percent of the total and catfish accounted for 28.2 percent, according to customs data, with lobster, crab, squid, and octopus making up much of the remainder. 

Vietnam primarily sends its seafood to China through inland borders between the two countries and via ocean shipping. Trading through the inland border crossings was complicated after China intensified inspections of Vietnamese goods, and seafood arriving into China’s ports was required to pass a strict inspection regime. If traces of Covid-19 were detected, the shipment would be kept at the port for about two weeks for disinfection and the company that owned the container would be suspended from shipping its products to China.

Speaking at a regular press conference of the Ministry of Agriculture and Rural Development on 30 December, Vietnam Department of Quality Management of Agro-Forestry and Fisheries Products’ Deputy Director Le Ba Anh said as China continues to reopen its economy, its foodservice sector is expected to flourish. As a result, Vietnam’s lobster, vannamei, black tiger shrimp, and crab exporters will see much higher Chinese demand, Thanh Nien Online reported.

While the pandemic created some difficulties in the bilateral trade relationship, Anh said seafood exchange between Vietnam and China nonetheless developed over the past two years. China has issued 802 active licenses to Vietnamese companies to export seafood products to China, while Vietnam licensed 780 Chinese companies to ship seafood to Vietnam.

The upcoming Lunar New Year holiday in China will further boost demand for fresh seafood there, and declining shipping rates and Vietnam’s advantageous proximity to China are giving Vietnamese seafood a competitive advantage there, according to VASEP’s Hang. However, she said other competitors who supply similar products will obtain this opportunity to drive up sales to China as well.

VASEP General Secretary Truong Dinh Hoe told the Sai Gon Giai Phong newspaper said after China reopens fully, his agency will send trade representatives to China to make a formal assessment about the market conditions there.

Photo courtesy of Vietnam Posts