Vietnam cautiously optimistic about pangasius exports in 2022

Vietnam Association of Seafood Exporters and Producers (VASEP) has expressed a cautious optimism about sales of pangasius in 2022, as challenges caused by the COVID-19 pandemic will continue to face the industry in the new year.

The higher costs of production, and higher export costs coupled to uncertain demand in key markets, are the main obstacles the industry will face this year, according to VASEP General Secretary Truong Dinh Hoe.

Vietnam’s pangasius industry had to deal with “unpredictable difficulties” in 2021 as the fourth outbreak of COVID-19 severely disrupted the industry’s production and export activities. Starting in the third quarter, pangasius producing provinces and cities in the Mekong Delta underwent strict and prolonged lockdowns to curb the spread of COVID-19, directly affecting the entire supply chain – from farming to processing and exports.

In addition to the supply chain impacts, companies were required to implement a “3-on-site” model, meaning workers had to work, eat, and sleep within the premise of their plants, causing further costs for the producers.

Meanwhile, freight costs have risen by between eight and 10 times compared to a year before.

The combined challenges have pushed down the export value of pangasius by 21 percent year-on-year to USD 295 million (EUR 261 million) in the third quarter.

Exports to key markets in 2022 will also be impacted by the ongoing reaction to COVID-19. Countries around the world continue to implement various economic reopening policies to co-exist with the coronavirus, and many have introduced stimulus packages to promote growth in 2022. Amid inflation risks and possible supply chain disruptions caused by the pandemic, companies are likely to deal with increases in electricity prices, feeds, and raw materials causing production costs to increase.

Despite headwinds in 2021, Hoe believes that China (including Hong Kong) will remain one of the most important markets for pangasius producers in Vietnam in 2022.

In the first 11 months of 2021, Vietnam exported pangasius worth USD 376 million (EUR 332.5 million) to China (including Hong Kong), 22 percent lower year-on-year.

Exports to China have experienced major disruptions since April 2021 due to increased testing of frozen seafood cargoes for COVID-19 by Chinese authorities as part of the country’s overall strategy to implement a “zero COVID” policy. The heightened inspections have resulted in the delays of clearance for shipments, adding further costs for both Vietnamese exporters and Chinese importers.

In the second half of December, more than 1,500 container trucks carrying agricultural products, including more than 1,000 frozen seafood containers, were stranded at Mong Cai in Vietnam, which borders China, as Chinese authorities intensified strict measures to prevent COVID-19 from entering China, according to Vietnamese media reports.

VASEP said despite the challenges, China will remain the largest buyer of pangasius from Vietnam in 2022. But the cost for sending pangasius cargo to China is expected to double that in 2021 due to the continued shortage of containers, higher freight rates, and more difficult customs clearance at Chinese ports.

The uncertainties in supply, along with higher prices, are likely to drive pangasius out of many restaurant menus in China. Restaurants may end up replacing Vietnamese pangasius with domestic Chinese species thanks to supply and price advantages, Hoe said.

For the U.S. market, 2021 was considered a success for many pangasius exporters from Vietnam. Sales to the U.S. reached USD 324 million (EUR 286.5 million) in the months spanning January to November, soaring 48 percent year-on-year, making it the second largest destination for pangasius from Vietnam.

Leading exporter Vinh Hoan said its sales to the U.S. were worth VND 415 billion (USD 18 million, EUR 16 million) in November 2021, up 68 percent year-on-year and accounting for 45.5 percent of the firm's total sales.

However, both general secretary Hoe and  VASEP Deputy General Secretary To Thi Tuong Lan, as cited by local media, said that the growth in sales to the U.S. in 2022 will not be as high as in 2021 as “they have already purchased sufficient volume for their need.”

For the European Union and United Kingdom, it is unlikely there will be a sudden uptick in pangasius exports as they are struggling with the new COVID-19 variant Omicron. Moreover, many customers in the E.U. and the U.K. may be unwilling to pay more for pangasius, the price of which has risen due to skyrocketing freight rates.

Amid uncertainties in key markets, VASEP said it hopes sales to smaller potential buyers – including Mexico, Brazil, Colombia, Russia, and Egypt – will grow to partially offset the possible decline in exports to China and other major destinations. These five markets saw sales grow by between 44 and 84 percent year-on-year from January to November of 2021, with a combined export value accounting for 16.3 percent of Vietnam’s total pangasius export value in the period.

VASEP also said the supply of raw materials is a matter of concern in 2022, following the sharp decrease in stocking during the lockdowns in the third quarter and cold weather conditions in late 2021. The price of pangasius materials and feeds are expected to remain high in 2022.

According to VASEP’s forecasts, pangasius exporters are expected to bring home a turnover of USD 1.7 billion (EUR 1.5 billion) in 2022, up 13 percent from the estimated value in 2021.  

Photo courtesy of Vietnam Association of Seafood Exporters and Producers