Recently we are facing important changes in the situation here in Vietnam and China. It is important that the Ocean Treasure team share the information to help you understand more what is happening here and how it can affect your own business.
I will start with the situation in Vietnam (Panga) since the covid is affecting the whole industry more.
Raw material situation
First of all, collecting the raw material, the social distance restriction is highlighted due to the restriction of the Government Directive 16. The new raw material is hard to collect because less labor can go to the farm. The transportation fee is much higher than before, even tripled. Few trucks will load the raw material to the factory because there will be many checkpoints during the long distance. However, if one driver drives to another area to collect the material, this driver will be quarantined, badly influencing the material transfer.
Second of all the labor work, since the daily confirmed cases are still high, factories ask the workers to stay in the factory 24 hours. Only 20%-30% of the workers choose to stay and live in the factory, and the factory will pay 3-4 times salary than usual. Since now, the workers of some factories have stayed in the factory for almost two months. The factory thought the whole lockdown would only last till early August, but the situation seemed not to end soon. This complete lockdown will continue and will last at least two to three weeks.
Factories’ production, most of them have the stock of semi-finished products. As Ocean Treasure knows, these stocks can last for about one month. Many factories stopped gutting the new materials for the processing situation since there might be some infection from the fish from the farm. All the labor now is doing packaging and will not be in contact with the raw material.
Many factories are hesitating to accept the new orders because they cannot afford that much production yet. Usually, a big factory can produce 200-250 containers a month, but now the capacity is only 30-40 containers. Most of the factories have many pending orders that need to finish so that the production capacity will be a big issue for the factory. Also, there is a high possibility that the factory may have to cancel some orders according to the actual status.
Shipping lines have announced increasing freight rates and fees, especially in many essential routes such as the US, Europe, Canada…which causes sudden difficulties, congestion, and very high costs for Vietnam’s seafood export industry and export industries in general.
Now let’s review what is the situation with Chinese tilapia and the local situation. It can have similarities with Vietnamese Panga:
Currently, the raw material from Hainan is 9.2 RMB/kg, from Guangdong is 9.5 RMB/kg. But after typhoon and over-harvesting, the fish in this couple of days becoming in shortage, so the price may go up by 6.5%-7.3% increase only for the raw material, which we never faced before
Orders are increasing; many long-term or big orders from the USA recently come back. Because they can’t wait for the freight and raw material prices to go down; they must purchase now for Christmas’s peak season. At this point, the other market will be in big competition with the USA demand.
In August, the freight cost will have another 2000$ increase for most of the shipping line. Most shipping lines need to book the container one month in advance, but we still need to bid for the container, and the price is high.
The pandemic situation in China now is hard to predict; since the outbreak in Nanjing for the Delta Variant, China starts the restriction in some areas. Some new cases have been found in other provinces, and this might affect some seafood processing plants. Because if more cases are found, there might be another lockdown coming, especially for the frozen food section. And this could be a big problem for the exporting market.
Some factories in the North have been closed after some cases of Covid 19 were found in the plant. Ocean Treasure team advises you to follow all our latest news and updates carefully in order to be able for you to make the right decision. We are facing some lockdown which will lead to delay. For more information contact us we will give you more details.
CEO OF OCEAN TREASURE WORLD FOODS LIMITED