Minh Phu Seafood CEO Le Van Quang is warning Vietnam’s shrimp industry that it faces a difficult rest of 2022.
Minh Phu is Vietnam’s top shrimp exporter, having earned USD 648.7 million (EUR 567 million) via its shrimp exports in 2021, an increase of 10 percent from 2020.
At Minh Phu’s annual stakeholders meeting on 24 June, Quang said high inflation, a worsening situation when it comes to shrimp diseases, bad weather conditions, and a labor shortage are compounding to present a challenging second-half of 2022 for Vietnam’s shrimp sector.
Nevertheless, Minh Phu remains on target to earn a net profit of VND 1.266 trillion (USD 54.4 million, EUR 50.8 million) in 2022, an increase of 95.2 percent year-on-year, Quang said. That is in line with the company's June 2022 announcement it planned to double its net profit in 2022. It is also on track to produce 64,600 MT of processed shrimp in 2022, up 7.7 percent from last year, and Quang said he expects his firm to reach USD 796 million (EUR 742.6 million) in shrimp exports in 2022, a growth of 22.7 percent year-on-year.
Addressing his company’s annual stakeholders meeting on 24 June, Quang said the disease situation in the Mekong Delta this year is “more complicated” than the previous years. Farmers have also had to deal with more rain, forcing them to conduct early harvesting and preventing restocking.
Meanwhile, inflation rates in major shrimp markets around the world remain at high levels, which is likely to affect consumption in the last six months of 2022, Quang said.
Like other Vietnamese companies, Minh Phu is facing a labor shortage. Currently, the company’s processing plants in Ca Mau and Hau Giang provinces are operating below their designed capacity due to a lack of workers. The two factories can are processing less than 400 metric tons (MT) of shrimp daily, below the company’s maximum capacity, Quang said.
“Vietnam is a favorite destination for companies from around the world, with many new factories being opened. Therefore, competition to attract local workers is getting fiercer,” Quang said.
In response, Minh Phu is in the process of applying advanced automation technologies at its facilities to enable a reduction in workforce requirements. The company aims to reduce its total worker headcount by between 50 and 70 percent at each of its processing plants, Quang said, without providing a timeframe for the shift.
Minh Phu has been heavily reliant on sales to the United States to drive its growth. In 2021, the U.S. was the company’s top market, accounting for USD 221.1 million (EUR 210.2 million) in sales, up 48 percent from 2020. However, in the first five months of 2022, Minh Phu’s U.S. sales – while reaching USD 42.1 million (EUR 40 million), 10 percent higher year-on-year – made it the company’s fourth-largest market.
Overall, the U.S. remained the largest buyer of shrimp from Vietnam in May, purchasing USD 99 million (EUR 93.4 million) worth of Vietnamese shrimp products in the month, up 2.8 percent from a year ago, but down from the 52 percent growth rate achieved in April. However, between January and May, Vietnam’s U.S. shrimp exports totaled USD 390 million (EUR 368 million), 21 percent higher year-on-year.
According to the Vietnam Association of Seafood Exporters and Producers, high inflation levels, China’s restrictive policies aimed at containing COVID-19, the Russia-Ukraine conflict, labor shortages, and disruptions in the supply chain in the U.S. are affecting sales and consumption of shrimp in the U.S.
Quang said the company has had to adjust its sales strategy in the U.S. because of rising costs and congestion at U.S. ports. Such congestion has existed for years, but has not been addressed well by the U.S. government, he said. It often takes too long to unload cargo and transport it to storage facilities, which Quang said was resulting in higher costs for his company, at times to the point of creating losses from its sales in the U.S.
“We do business and seek to earn profits from it. Should we continue to sell products to that market while this either fails to generate high returns or potentially creates legal risks?” Quang said.
Through its subsidiary MSeafood, which handles its U.S. export business, Minh Phu and its partners, including Japan’s Mitsui and Vietnam’s Gemadept, have made an effort to develop a port that can handle its shipments in a smoother manner, but their attempts have been rebuffed, with the U.S. government citing national security concerns, Quang said.
“I have not seen any major expansion of ports in the U.S. for the last 20 years while business operations have expanded significantly,” Quang said.
VASEP said demand from U.S. importers is unlikely to rise anytime soon because shrimp stockpiles in the U.S. are at high levels, as importers have purchased a large volume of shrimp from Vietnam, Indonesia, India, and Ecuador in recent months.
Photo courtesy of Minh Phu Seafood
