MARKET ANALYSIS

 

Summary:
 

The year 2015 reversed the gains Vietnamese shrimp exporters made in 2014, as currencies of other exporting countries devalued against the US dollar, increasing competition, and global prices dived.

  

2015 a tough year for Vietnam shrimp exporters

Vietnam's shrimp exports in the 11 months through November 2015 hit US$2.7 billion, down 25.6% year on year, data from Vietnam Customs showed. Estimated total for the whole year is US$3 billion, down 25% year on year. Nevertheless, shrimp still dominated the seafood exports, accounting for 44% of total value of exported seafood.

 

The gain in Vietnamese shrimp exports in 2014 was reversed in 2015. Shrimp sales in 2015 reported a year-on-year decline of 25-30%. It was attributable to several factors including weak demand from major markets, slump in global shrimp price, rise in India's shrimp production and the sharp depreciations of Indian rupee, Thai baht, Chinese yuan and Indonesian rupiah against the US dollar.

 

In 2015, Vietnamese shrimp was exported to 92 markets. The top 10 markets included the US, Japan, EU, China, South Korea, Canada, Australia, Taiwan, ASEAN [Association of Southeast Asian Nations] and Switzerland, which made up nearly 95% of the total shrimp export value.

 

Shrimp exports to the main markets suffered sharp declines: -35.4% to the US, -18% to the EU, -22.8% to Japan and -17% to China. On the other hand, shrimp exports to the UK increased 17.3% and Hong Kong 3.9%. In the UK, which is the largest importer of Vietnamese shrimp in the EU, there was high demand for warm-water shrimp as cold-water shrimp supply was limited and prices were too high.

 

Challenges

 

The volatile market currencies were the first factor that affected Vietnam's shrimp exports in 2015. Many countries devalued their currencies. The volatility of currencies placed commodity prices under pressure. In the past three years, China has devalued the yuan after the major currencies fell sharply against the US dollar. From January 2013 to August 2015, the euro depreciated 20%, the yen was devalued 39% and won was down 11% against the US dollar.

 

In August 2015, the Vietnamese dong went down 5% against the dollar. The deepest depreciation against the US dollar was seen in the currencies of developing countries, such as the Brazilian real (-72%), Colombian peso (-52%), Indonesian rupiah (-42%), Malaysian ringgit (-33%), Indian rupee (-20%) and Thai baht (-18%). The depreciation in currencies increased seafood price competition in the global market.

 

The sharp dive in global shrimp price was the second factor that affected Vietnam shrimp exports in 2015. The world economic recession, particularly in major markets and declines in consumption demand caused the prices of most agro and fishery products to decrease. For example, the price of Vietnam's black tiger shrimp count 16/20, a US market favorite, was down 14% from US$11.3 per pound in early 2015 to $9.75/lb in the third quarter. Black tiger shrimp count 21/25 slid 30% from US$7.5 /lb to $5.8 while the price of Indian shrimp in the same type also decreased from $6.9/lb to US$ 5.85.

 

Due to higher input costs, Vietnamese shrimp price was relatively high.

 

Also, demand for marine and freshwater finfish became higher.
 
 

 

Opportunities

 

Opportunities still abound for Vietnamese shrimp exports, thanks to the decline in antidumping duty, the signed free trade agreements (FTAs) and the Trans-Pacific Partnership (TPP).

 

On Sept. 7, 2015, the US Department of Commerce (DOC) issued the final results of the ninth anti-dumping duty administrative reviews (POR9) on frozen shrimp imported from Vietnam. The period of review is from Feb. 1, 2013, to Jan. 31, 2014. DOC imposes average anti-dumping duty of 0.91%, compared with 0.93% in the preliminary results announced in March 2015. This is much lower than the final result of POR8, which was 6.37%. This is a good news for Vietnamese shrimp exporters. The reduction in antidumping tax helps ease the burden on duty rate imposed on the shrimp exporters.

 

The FTAs and TPP offer incentives for seafood exporters by reducing import duty in the partner markets. Accordingly, shrimp exports enjoy benefits after the bilateral FTAs with South Korea, the EU and the Eurasian Economic Union (EEU), and TPP have been signed. Import duty of raw shrimp is reduced to 0% as soon as these agreements take effect. For value-added shrimp products, that road map of duty reduction will depend on each market.

 

Furthermore, the FTAs and TPP help to expand markets and increase the competitiveness of Vietnamese shrimp because rival countries have not signed the FTAs with these partners.

 

The TPP and the FTAs will impact positively on Vietnam shrimp exports in 2016. Despite being affected by the downtrend in shrimp price and currency fluctuations, Vietnamese shrimp exports are expected to increase 12% to around US$ 3.3 billion. --VASEP

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