Vietnam - Petrol price hike weakens the weak demand

VietNamNet Bridge – The petrol price hike has put manufacturers, who have been worried stiff about the slow sale, on the tenterhooks. The price increase has been described as a strong blow dealt on the already weak purchasing power, which would make the output of the production stuck.

On April 22, or two days after the petrol price increase was announced, food trading companies affirmed that they have received the notices from transport companies about the transport fee increase of 1-10 percent.

Input costs increase again

Nguyen Tuan Phuong, Director of the Dong Nai Food Corporation (D&F) said the transport company has raised the fee by 10 percent after one month of trying to keep the fees unchanged.

Meanwhile, Nguyen Van Ky, General Director of Agifish An Giang, has complained that the input costs of the frozen seafood for domestic consumption have increased by 20 percent so far this year.

Deputy General Director of Saigon Food Le Thi Thanh Lam has also said that the production cost has increased by 7000 dong per product.

As for fishermen, the 500 dong per liter diesel price increase means that they have to pay 15 million dong for every fishing voyage. Tran Van Hoa, a fisherman in Phuoc Tinh commune of Long Dien district in Ba Ria – Vung Tau province, said that fishermen have decided to stay offshore, because the money earned from fish sales is not big enough to cover fuel expenses.

Hoa said that catching fish now cannot feed fishermen any more, because of the low demand. In late 2011, fishermen still could sell surmullet to seafood companies at 18,000-20,000 dong per kilo, but the price has dropped to 12,000-16,000 dong. Ca bo, a kind of fish which is the main product in the season, has seen the price drop from 10,000 dong to 3000-4000 dong per kilo.

Production stagnant because of low demand

The weak demand explains why the consumer price index in HCM City in April 2012 increased by 0.08 percent, the lowest increase in the last 19 months.

As the petrol price has increased, small merchants have foreseen that they would have to pay 5000-15,000 dong more for every time of carrying goods from wholesale markets to retail markets.

However, Nguyen Thi Ha, a vegetable and fruit seller at Hoang Hoa Tham Market in Tan Binh district of HCM City, said she would not dare to raise the sale prices because the demand is very weak.

Lam from Saigon Food has noted that the number of clients buying high grade frozen seafood for parties has decreased by 20 percent.

Truong Chi Thien, Director of Vinh Thanh Dat Company, has also said that if raising the sale prices, the sales would drop further. Therefore, he would try to hold out by keeping the prices stable.

“It would be risky to think about raising sale prices now,” he said.

Struggling to survive

Businessmen all said that all the possible measures to cut down expenses and optimize profits have been applied already. However, the money saved is not big enough to cover the expense increases. General Director of Agifish An Giang Nguyen Van Ky said businesses nowadays do not dream of making profit.

Meanwhile, Lam has affirmed that the company still has to struggle to survive and maintain production, even if they break even or take loss. If the company halts production, it would lose workers and clients.

The revenue in the first three months of the year of Vinh Thanh Dat was equal with that of the same period of the last year, though the expenses have increased sharply. The latest petrol price increase alone would force the company to spend 20 million dong a month more to maintain production.

Source: SGTT

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