Fimex chair: Improving shrimp-processing capabilities key to maintaining Vietnam’s competitiveness

Strengthening Vietnam’s capability and capacity for value-added processing will be essential if the country hopes to maintain its competitive advantage in the global shrimp markets, according to Fimex (Sao Ta) Chairman Ho Quoc Luc.

In his presentation at the 2022 Vietfish International Fisheries Exhibition on 25 August in Ho Chi Minh City, Luc said the global shrimp market is getting much more competitive. Ecuador, India, Vietnam, Thailand, Indonesia, and China are the world’s six largest shrimp producers, and each country is getting better at leveraging its own strengths to grow its market share, Luc, the former chairman of Vietnam Association of Seafood Exporters and Producers (VASEP), said. To win this competition, Vietnam must focus on deep processing and maintain its advantages in its major markets, Luc said.

Around 10 to 15 years ago, Vietnam’s shrimp-processing capacity lagged far behind that of Thailand and Indonesia. Now its capacity has reached a world-class level, which is equivalent to Thailand’s and ahead of Indonesia, according to Luc. The country’s ability to supply deeply processed, high-quality shrimp, has helped Vietnam become the top shrimp-exporting country to Japan, South Korea, the U.K., and Australia. Vietnam is also the second-largest seller of shrimp in the E.U. and the fourth largest supplier in the U.S., Luc said

Vietnam’s government and its seafood industry are working together to continue to transform the country’s processing sector in a large-scale, modern, and sustainable industry, with a view to becoming a global hub for seafood processing by 2030. According to a plan to develop the country’s seafood-processing industry approved by the government in August 2021, 60 percent of the country’s total export value of shrimp will come from sales of deeply-processed and high-quality shrimp by 2030.

In November 2021, three months after the government’s plan was announced, Minh Phu Seafood announced it would build three new shrimp-processing factories with a combined capacity of 54,000 metric tons (MT) per year in the Mekong Delta, in a bid to up its global competitiveness and maintain its status as Vietnam’s top shrimp exporter. The cost of the project was estimated at VND 1.35 trillion (USD 57.75 million, EUR 57.82 million).

In April 2022, Fimex made its own expansion announcement, rolling out a plan to put two new processing plants into operation later this year, with a combined annual capacity of 25,000.

In his Vietfish presentation, Luc specifically mentioned Ecuador as Vietnam’s biggest competitor, acknowledging it has unbeatable advantages in certain markets. Ecuador’s shrimp production hit an all-time high of 1.86 billion pounds (843,681 MT) in 2021, up 24 percent from its previous all-time high of 1.49 billion pounds (675,852 MT), set in 2020.

“Seed is the decisive factor for success in shrimp farming. We do not have sufficient information about their domestic production of broodstock, but I am sure their high commercial production comes from their good seed,” Luc said.

Luc said he was impressed Ecuador could produce such a large volume of shrimp in 200,000 hectares of ponds, which is much lower than Vietnam’s 747,000 hectares of productive area.

Luc said it is likely Ecuador’s shrimp output has surpassed that of Vietnam over the past four years. Vietnam’s estimated shrimp production reached 970,000 MT in 2021, though that figure is a combination of data supplied by its provinces and cities and has not been independently verified.

Apart from its ability to supply a large volume of shrimp at low prices, Ecuador’s relative proximity to North America and Europe provides it an advantageous position compared to the world’s other major producers, all located in Southeast Asia and South Asia. Ecuador is the second-largest shrimp supplier to the United States, holding a market share of 25.5 percent in June 2022. Together, India, Ecuador, and Indonesia accounted for 80 percent of the market in the U.S.

According to Luc, it is not realistic for Vietnam, which held a market share of 9.3 percent in the U.S. in June, to grab more U.S. market share for raw, frozen shrimp. Vietnamese exporters should instead focus on deep processing and provide the market with deeply processed products at a level of quality other countries cannot compete with.

“It is very difficult for Vietnam to expand in this market because each of the competitors has their own advantages. For example, shrimp from Indonesia is not subject to U.S. antidumping duty, while Ecuador can supply low-priced shrimp from a shorter distance,” Luc said.

In the E.U., Vietnam was the second-largest supplier of shrimp after Ecuador. Beating Ecuador in this market is virtually impossible for Vietnamese processors because “their growth is 20 percent, while ours is 8 to 10 percent,” Luc said.

According to Luc, China, not the U.S., is the biggest consumer of shrimp in the world, because the former produces more shrimp than the latter, and has a much larger population. China produces millions of tons of shrimp, including vannamei, black tiger shrimp, and crawfish, every year, and still is a top importer of minimally processed shrimp from Ecuador, India, Argentina, and other producers for domestic processing and consumption.

“Vietnam has less than 10 large-scale processing plants, while China possibly runs thousands of such factories to serve their huge market. Therefore, unlike in other markets, deeply-processed shrimp from Vietnam has little room to thrive in China,” Luc said.

Although Vietnam can’t rely on its distance advantage to boost sales to China as Ecuador does with the U.S. market, Vietnamese exporters might be able to grow their China sales by offering more steamed black tiger shrimp, which is favored by Chinese consumers and produced in large volumes by Vietnamese farmers.

Vietnam’s total shrimp export value in the first half of 2022 rose 31 percent year-on-year to USD 2.3 billion (EUR 2.303 billion). Its main markets were the U.S., Japan, the E.U., and China, according to VASEP.

Photo courtesy of Fimex