Exporters struggle with raw materials shortages

Exporters struggle with raw materials shortages

Many exporters, including electronics, wood, textiles, and footwear companies, are concerned about a shortage of production materials caused by ongoing supply disruptions.

Raw materials shortages

In the first half of 2022, export turnover of goods reached US$185.94 billion, up 17.3 percent over the same period last year. But while many enterprises have orders until the end of the year, they cannot speed up production due to raw material shortages.

Director of Datalogic Vietnam Limited Liability Company, Dang Van Chung said the market demand is large, but businesses cannot accept new orders due to lack of electronic components. It also takes time to find alternative sources of raw materials, as reflected in the factory's revenue being 15 percent lower than the plan.

“The shortage of electronic components is a general problem of the electronics industry. Relevant departments of the company are helping seek alternatives to meet customers’ needs,” said Chung.

Vo Quang Ha, Vice Chair of the Dong Nai Wood and Handicraft Association, said wood supplies from Europe to Vietnam have plunged due to the impact of the Russia-Ukraine war. Vietnamese wood enterprises had to pay skyrocketing prices to obtain supplies. “The import price of pine wood in March 2022 was more than US$300 per cubic meter, an increase of nearly US$100 per cu.m compared to 2021. Supply of wood materials from major markets such as New Zealand has dropped by 80 percent, Argentina down by 53 percent, Australia by 72 percent and Europe by more than 90 percent,” Ha said.

The material shortage also led to the disruption in the supply and demand chain as production costs increased. In 2022, the seafood industry’s export target of US$10 billion seems unlikely due to the lack of materials and high costs of raw materials and animal feed, leading farmers to narrow their production scales.

Nguyen Anh Nhan, Business Manager of Go Dang Joint Stock Company said the company still has sufficient raw materials to ensure production, but higher costs of raw materials and animal feed have resulted in higher prices of its products, affecting its competitiveness.

Urgent solutions

Solutions to the shortages is a vital issue for many Vietnamese businesses. Many businesses have negotiated with partners to reduce profits and agree on flexible delivery deadlines, while establishing new supply chains of raw materials and increasing applications of science and technology to reduce costs and increase competitiveness.

Specifically, wood enterprises in Dong Nai Province have switched to importing more materials from the US instead of Europe. They are also renegotiating with partners to switch to other types of Vietnamese wood made from Melaleuca or rubber trees.

However, delaying delivery, sharing raw materials with partners and reducing costs are just short-term solutions. According to experts, the state needs to formulate macro policies so that businesses can leverage domestic raw material advantages to provide for long-term production.

Director of Binh Dinh Fishery JSC, Cao Thi Kim Lan said the issue requires government involvement in stabilizing fuel prices and costs for fishermen to ensure raw material supplies for seafood processing.

VietNam Economic News