VietNamNet Bridge – A lot of European importers have asked for delivery delays or canceled contracts, which have caused big losses to Vietnamese exporters.
The public debt crisis in European countries has forced commercial banks in the countries to restrict lending and tighten lending conditions. As a result, European importers have to cut down orders and try to negotiate with Vietnamese partners for price reductions. The narrowed European market has caused big worries to Vietnamese enterprises, because Europe has been the key export market of Vietnam.

Losing orders, having to reduce export prices

On the morning of July 26, Nguyen Van Ky, General Director of Agifish An Giang instantly booked an air ticket to fly to Egypt, where he plans to meet the partner to discuss the way out for the export contracts.

“A lot of clients have asked to delay the deliveries for a couple of weeks, therefore, I have to meet them for re-negotiation,” Ky said.

The European market consumes 40 percent of Agifish’s total tra fish exports. In general, from the end of May to the end of August, the market enters the summer holiday, and both buyers and sellers only make deliveries for the contracts which were signed before. In 2011, importers continuously ask for delivery delays and price reductions because of the big financial difficulties and low demand in the market.

However, delivery delay and price reduction are not the things Vietnamese exporters want. They have to pay high for bank loans due to the tightened monetary policies; therefore, they want to deliver the exports soon to get money paid to pay bank debts.

“The lending interest rates and production costs are very high. Therefore, we wish to clear exports as soon as possible,” he said.

In early June 2011, a garment company in HCM City received the notice from a European importer that the 5-million dollar order in the contract package worth 19 million dollars has been cut due to the importers’ financial difficulties.

Managers of the company have not informed the trouble to shareholders, but they have been moving heaven and earth to seek a new order to replace the canceled order.

Garmex Saigon, another garment company, has also reported the 10 percent decrease in the orders from the EU.

Le Quang Hung, Chair of Garmex Saigon, said that the client who buys products from Garmex Saigon is a well known group in Europe which has the revenue of several billions of euros a year. However, even the giant has also asked the company to delay the deliveries, accepting to compensate for some kinds of fees.

The biggest problem for European partners now, according to Vietnamese exporters, is the restrictions in credit access.

Due to the credit limit cuts, seafood importers cannot import goods to store for the year-end consumption season. In the first six months of the year, Vietnam’s tra fish export turnover reached 826 million dollars, which, though representing a 27 percent increase in comparison with the same period of the last year, witnessed the sharp fall of 50 percent from Spanish, Egyptian, Dutch and German markets.

A kilo of tra fish fillet is priced at approximately 3 dollars now, down by 0.2-0.3 dollars. Meanwhile, Truong Dinh Hoe, Secretary General of the Vietnam Association of Seafood Exporters and Producers (VASEP), said that the tra export to the EU in July would be even worse, since trade activities have been frozen.

Exporters on tenterhooks

“We have got distracted,” Director of a tra fish export company in Dong Thap province said. “Only 50 percent of products have been exported, while the remaining volume has been kept in stores”.

The material prices now stay at 22,000-24,500 dong per kilo, which means that the production cost of one kilo of fillet is about 55,000 dong. As such, for every kilo of inventory products, enterprises would have to pay 1425 dong, including 825 dong in bank loan interests and 600 dong in storage fee.

General Director of Hung Vuong Seafood Company Duong Ngoc Minh hopes that importers would come back in early September, when the consumption season in Europe begins. However, he said, if the situation cannot be improved, Vietnamese enterprises would meet misfortune.

KC