Vietnam hardest hit as delta variant ravages SE Asian shrimp logistics, prices: UnderCurrentNews
Tom Seaman: UnderCurrentNews
The highly infectious delta variant of COVID-19 is sweeping through Southeast Asia’s major shrimp production countries, with raw material prices dropping fast.
According to the World Health Organization’s dashboard, Vietnam has 157,507 confirmed COVID cases and 1,306 deaths through Aug. 2. Although Indonesia (3,462,800 confirmed cases and 97,291 deaths) and also Thailand (633,284 cases and 5,168 deaths) dwarf this,
Vietnam has locked down far harder than its two Asian shrimp rivals.
As a result, processors in Vietnam — the third largest shrimp exporter globally (see chart below) — are operating well below capacity. Farmers continue to harvest in significant volumes, pushing prices down. Although the industries in Indonesia and Thailand are less impacted, prices are also on the way down in both.
“The delta variant is tearing a destructive path right through Asia. Things are not good at all,” said Jim Gulkin, managing director of Siam Canadian Group.
“For Thailand and Indonesia, business continues, albeit with some hiccups. In Vietnam, it’s a different story. The Vietnam government has enforced a very strict lockdown, which has affected all aspects of the supply chain. Certainly, there will be major delays in shipments,” he told Undercurrent News.
In Vietnam, Undercurrent’s prices portal shows farm gate vannamei shrimp prices in Vietnam have dived. Week 30 (July 26-Aug. 1) prices are down 6.6% VND 100,000/kg ($4.35/kg). For 80-count, the week-on-week drop was 8% to VND 82,000/kg ($3.57/kg), with 100-count down 4% to VND 73,000/kg ($3.18/kg). Vietnamese raw material prices hit a peak in week 11.
However, the 50, 80 and 100 count prices in week 30 are down 33%, 25%, and 28% from this level. You can see the drop below in both Vietnamese dong and USD on the Undercurrent prices portal, using data from Vietnamese seafood technology company Tepbac.
A comparison of the price (see below) converted to dollars for 50 count vannamei from Vietnam to the same size from Indonesia (the data is Jala Tech) shows how the former has fallen more steeply. Prices in Indonesia are falling, but have been more stable. Meanwhile, the price for a 60-count (Undercurrent’s prices portal does not have 50-count data from Thailand) Thai shrimp has also fallen considerably, but not as much as Vietnamese raw material.
“Falling prices in Vietnam are mostly a result of the lockdowns and reduced production resulting from that,” said Gulkin.
“COVID is affecting the whole shrimp and seafood supply chain, from feed mills, hatcheries, farms, processing plants, ports, logistics and materials for the industry,” said Nguyen Khanh Giau, who runs Vietnamese seafood sourcing and consultancy rm Seabina Group.
Vietnamese shrimp prices are being depressed by both the internal issues in the country and falling prices in other production countries, Giau said.
Its shrimp sector is under “high pressure” to solve these problems in August. “Plus, global shrimp consumption is not clear at the moment due to the delta variant [in shrimp markets].”
The main issue for Vietnam, however, is the government’s “three-on-site” directive. Known as 3TC in Vietnam, this means processors must keep workers quarantined on-site to stay open, Giau said. The “three” refers to the need for companies to be able to accommodate staff eating and sleeping on-site, as well as working.
Shrimp prices have been coming down with the pressure on factories to apply the rule, Giau told Undercurrent. The situation has coincided with peak harvesting season, he said. “So, farmers cannot keep shrimp in farms longer when they have grown to big sizes. The farmers keep harvesting and huge amounts of shrimp come to the factories every day.”
The deluge of shrimp comes as many factories are operating well below their standard capacity, he said.
As much as 70% of the factories in the southern provinces have closed due to their inability to implement the directive, according to a report from the Vietnam Association of Seafood Exporters and Processors (VASEP) sent to the country’s government.
Those still operating are facing difficulties and can only work at 40-50% of their previous capacity, VASEP told the government. The combination of smaller operators closing and bigger processors working at reduced levels means the overall output will likely be down to 30-40% of the average level, wrote VASEP.
The policy will only be sustainable for two to three weeks for medium companies and four to ve for larger ones, VASEP told the government.
VASEP calls for the government to prioritize vaccinating workers in the seafood sector, a significant industry for Vietnam.
‘3TC’ for Ca Mau, Bac Lieu next?
Last week, factories in Ca Mau and Bac Lieu, the two provinces with the most extensive shrimp production capacity in Vietnam, were operating more or less normally and had lower case levels than the provinces closer to Ho Chi Minh City.
Although the 3TC directive technically applies to all companies, the government let those in Ca Mau and Bac Lieu use it more slowly due to the lower COVID levels, said Giau.
However, over the weekend, the government started to enforce the policy more rigorously in the southern provinces, beginning with Cau Mau. That’s where around 70% of the smaller processors have closed, as mentioned in the VASEP notice, he said.
Bac Lieu is likely to be next, Giau told Undercurrent. “I know Bac Lieu also asked factories to prepare for 3TC. If COVID cases increase in
Bac Lieu, then surely 3TC kicks off soon.”
The move in Cau Mau caused a further drop in raw material prices in the range of VND 5,000-VND 8,000/kg ($0.22-$0.35/kg), with smaller sizes dropping more than larger, said Giau. “If Bac Lieu also applies 3TC, then the shrimp prices will drop further because they are the two provinces with the biggest shrimp farming and production in Vietnam.”
Other Mekong Delta provinces such as Tra Vinh, Ben Tre, Tien Giang and Long An have fewer shrimp factories, but are also severely impacted, said Giau.
“Normally, farmers in these provinces raise shrimp and harvest alive to sell to wholesale markets in HCM city. Now, these provinces are being affected seriously by COVID and factories have also halted production, so farmers are facing many difficulties,” he said.
“Traders in this region are trying to take shrimp to big factories in Soc Trang, Hau Giang and Can Tho to sell.” However, these factories are also struggling to implement 3TC and operate at a minimal capacity, said Giau.
The 3TC rule is proving far from easy to apply, he said. Firstly, there’s the “inconvenience for workers on personal activities such as washing, bathing and cleaning”. Then, workers do not want to stay in factories because they also need to care for children and elderly or sick relatives.
Factories are offering higher wages, bonuses, free meals and accommodation to attract them to stay and work, he said. “Many workers still resign or stay home because they are fearful of COVID. Furthermore, after applying 3TC, many factories found COVID cases in camps.
Some factories found so many cases then they must close down.”
Then, the logistical issues in Vietnam are getting worse. According to a report from
Hellenic Shipping News, containers are piling up at Cat Lai Port, part of the Ho Chi Minh port facility. The workforce at the largest container facility in Vietnam is down 50% to around 250. Cat Lai has been jammed up for over 90 days, with the plan to move containers to other ports, according to the Aug. 2 report.
Indonesia, Thai prices also down
Although Vietnamese prices are down most sharply, Indonesian and Thai raw material is also dropping.
“In Indonesia, exports have largely slowed down as a result of shipping difficulties,” Siam Canadian Gulkin told Undercurrent. “Indonesian processor’s cold storages are filling up due to inability to get containers to many destinations which in turn is forcing some to slow production down.”
“Prices are down because products are piled up at the packers,” the head of one shrimp packer told Undercurrent on July 29. “Some packers said this problem is caused by difficulty finding a container for export… we are now experiencing price decline.”
A second executive also told Undercurrent logistical frustrations have become more of an issue for the seafood sector than the country’s current COVID outbreak.
“Positive cases and mortality rates are still high. The government does not have enough money to support the people who are affected due to the lockdown if they continue the lockdown,” she said.
The data from Jala on the Undercurrent prices portal — which takes an average of the level in various provinces — illustrates the drop.
Prices for 80 count shrimp from Indonesia are down 6% week-on-week in week 30 to IDR 59,218 ($5.75/kg), 60 count is down 5% to IDR 67,218 ($4.65/kg) and 40 count is down IDR 83,218 ($4.09/kg) to 2%.
Looking at the year-on-year comparison with week 30 of 2020, 80 count shrimp from Indonesia is down 5% and 60 count 2%, but 40 count is up 3%, according to the data on the Undercurrent prices portal from Jala. You can see the prices in Indonesian rupiah first below, with a conversion to dollars under that.
In Thailand, prices are also dropping due to a lack of sales, said Gulkin. “As for Thailand, I think the main factor is lack of sales due to higher prices than other origins forcing raw material prices down.”
According to the Undercurrent prices portal, 60 and 70 count Thai shrimp is down 6% week-on-week in week 30 to THB 127.50/kg ($3.87/kg) and THB 117.50/kg ($3.56/kg), with 80 count down 7% to THB 107.50/kg ($3.26/kg).
Week 30 prices — from Talay Thai market, the largest shrimp auction market in central Thailand — are down 18% (60 count), 17% (70 count) and 19% (80 count) year-on-year. You can see the prices in Thai baht first below, with a conversion to dollars under that.
Freight rates, market
Even though raw material prices are down in Southeast Asia, this is being more than offset by the dramatic increase in freight rates, said Gulkin. However, lower raw material prices are not here to stay, he said.
“Unfortunately, the massively increased freight rates and complete uncertainty of container and routing availability more than negate any possible price reduction from the lower raw material prices. In any case, the overseas demand is as strong as ever, so these drops in raw material prices will likely be short-lived,” Gulkin told Undercurrent.
“US and Canada markets are currently very strong. The reopening of restaurants and other public venues has given foodservice a shot in the arm while retail remains very strong,” he said. “However, we will have to see what happens in the future and to what degree this delta variant will set things back again. Europe also sees higher consumption.”
Even if there are more lockdowns of restaurants in the west related to the spread of delta, online and offline retail will continue to boom, said Gulkin. “Regardless of consumption levels in restaurants, hotels and public venues, in-store retail, ecommerce, restaurant take-away, restaurant delivery, delivery apps etcetera, will all remain strong for the foreseeable future.”