Sourcing in Vietnam’s blog

The leather shoe export turnover of Viet Nam in the first 11 months of this year reached US$3.57 billion, a 16 per cent year-on-year decrease.Based on this turnover, the country’s shoe exports for December are projected to be around $300 to 400 million, making an annual total of roughly $4 billion, which is much lower than the originally targeted $4.7 billion.

Diep Thanh Kiet, deputy chairman of the Viet Nam Leather and Footwear Association (Lefaso) said that the sector’s exports had reduced by 14 to 15 per cent while the decrease of the country’s exports as a whole had been 15 per cent.

Explaining the situation, an official from the ministry said the sector had faced stiff competition from Brazil, India, Bangladesh and Cambodia. Many investors had also moved their factories to Cambodia due to the fact that the country had been granted the EU’s Generalised System of Preferences (GSP) and did not have an anti-dumping tax for itsleather-capped shoes.

Sharing his ideas, Kiet said Viet Nam’s leather shoe businesses had been subject to the anti-dumping tax of 10 per cent imposed by the EU since 2007.

At the beginning of the year, the EU removed the industry from it’s GSP causing the export tax to rise to 16 per cent for a market that makes up 75 per cent of the sector’s total export turnover.

According to experts, at this tax level, the country’s leather export turnover this year would reduce by at least 30 per cent.

They said that the sector needed a united effort, something that had been lacking in previous years.

He added that in this context, the expansion of the domestic market was a bright point in the downturn but the difficulties that hampered the sector’s development would continue to be a hugs challenge next year.

In an effort to improve the sector’s business in the future, the association targeted continued development in both domestic and foreign markets next year.

Under the plan, made-in-Viet Nam footwear would increase it’s domestic market share to 50 per cent, 10 per cent higher than the current level.

However, the target would be a challenge because the lower-income market has been flooded with Chinese goods and foreign brands now occupy the upper-income market.

“An associating model between leather shoe businesses and material producers would reduce the costs of materials. Some enterprises have proposed to set up industrial zones for the model,” he said.

Recently, the Lien Anh industrial zone specialising in materials for the leather shoe and garment industries was launched and is expected to actively contribute to the sector.

Nguyen Thi Tong, general secretary of Lefaso said businesses should find their own key products and suitable market segments.

Tong added that to reduce pressures in export and avoid commercial barriers, businesses should invest in high-tech production lines.

Kiet said the sector needed support from the Government, especially in human resources training.

Leather supply was also a big issue as most of the leather tanning enterprises had stopped their production due to environmental problems.

“Therefore, State support should be given to businesses to improve their technology,” he said.

With an export turnover of $4.8 billion last year, Viet Nam ranked fifth in the world of leather shoe exports. There are over 500 shoe producing enterprises operating in the country, generating jobs for around 600,000 labourers a year.

Source: VietNamNet/Viet Nam News

Rice traders offering to supply the Philippines, the world’s biggest buyer, raised prices by more than $100 a metric ton compared with last month, reflecting increased global demand.

Suppliers including Vietnam Southern Food Corp. offered to sell at $598 to $697 a ton at a tender today for a total of 600,000 tons, National Food Authority Deputy Administrator Vic Jarina told reporters. The offers compare with the $468.50 and $480 a ton that National Food agreed to pay at a Nov. 4 tender.

The Philippines advanced rice tenders for 2010 after storms hurt local output, exacerbating a domestic shortfall. India, the second-largest grower, may become a net importer in 2010 for the first time in more than two decades after drought cut local production. Rice is Asia’s most important food.

“Unfortunately for the Philippines, we have been moving into period of higher global rice prices, in part because India is also likely to import next year,” said Frederic Neumann, an economist at HSBC Holdings Plc in Hong Kong. “Higher rice prices are likely to prevail for quite some time.”

Rice futures in Chicago have jumped 37 percent from this year’s low of $11.195 per 100 pounds and traded today at $15.34. The Thai benchmark price, for 100 percent grade-B white rice, was set last week at $590 a ton, up from $561 the week before. The Thai price of the grade sought by the Philippines, 25 percent broken white rice, was set at $466 a ton on Nov. 25.

Record Prices

Higher rice prices could spur inflation in nations across Asia and Africa and may stoke social unrest if the poorest are unable to afford food. Rice reached a record in 2008 amid trade curbs by suppliers including India and Vietnam, fueling concern among policy makers that there was a global food crisis.

“Everybody was waiting for this tender because it will decide the price” for purchases that follow, Rakesh Singh, a trader at Emmsons International Ltd., said from New Delhi. Emmons was not among the companies offering supplies at today’s tender, which may be awarded within a week.

The Philippines may import as much as 3 million tons next year in a “worst case scenario,” National Food Spokesman Rex Estoperez said on Nov. 23. That’s more than 10 percent of next year’s global rice trade, estimated at 29.5 million tons according to the U.S. Department of Agriculture on Nov. 10.

Vietnam Southern offered 600,000 tons in today’s tender, and in total the suppliers offered as much as 1 million tons, Jarina said. The Philippines has announced four tenders for 2010 supplies and is seeking a total of 2.05 million tons.

The other four suppliers that qualified today are Toepfer International Asia Pte Ltd., Asia Golden Rice Ltd., Louis Dreyfus Corp. and Chaiyaporn Company Rice Ltd., according to National Food.

Vietnamese Forecast

Rice may climb about 50 percent next year to $800 a ton as demand surges, Truong Thanh Phong, chairman of the Vietnam Food Association, said on Nov. 29. The group represents more than 100 companies from the world’s top rice exporter after Thailand.

Global rice output is forecast to drop 3 percent from a year earlier to 432 million tons in the 2009-2010 marketing year, resulting in a shortfall of 4.75 million tons, according to estimates by the USDA on Nov. 10.

Storms this year damaged 1.3 million tons of rice in the Philippines. India’s monsoon-sown harvest may drop 18 percent to 69.45 million tons, according to the nation’s farm ministry. (Bloomberg)

The VND100 billion project (roughly US$5 million) is also the first in Vietnam to solely use domestically-designed equipment and technology.

The factory is scheduled to complete within the next three years and will be capable of processing 50,000 tonnes of products, including cashew oil, each year.

In addition to this project, the Dong Phu-based Ha My Company Ltd. has entered into a joint-venture with the Qua Solution Company of Japan to build a yogurt factory which is expected to roll out its first batch of products by 2012.

Vietnam Food Association (VFA) has recently announced that up to November 20, 2009, the country’s rice export has reached 6.45 million tonnes, in which over 5.573 million tonnes of rice have been delivered, gaining $2.256 billion in line with the FOB price.

Especially, within the first 20 days of November, the enterprises have exported only 201,740 tonnes for contracts with due delivery time, earning $83,376. The rice export price is reported to increase day-on-day for the newly signed contracts.

At the beginning of this week, the price of 5% broken rice is posted at $500 per tonne, up $40 against that of previous week.

A European Union plan to prolong tariffs on Vietnamese shoes for 15 months was thrown into doubt when EU nations criticized the bid to maintain protection for Europe’s producers against lower-cost rivals.

The opposition by national trade experts in the EU undermines the European Commission’s recommendation to extend the duties of as much as 16.5 percent on leather footwear from Vietnam. EU ministers must decide by early January whether to let the levies — meant to counter below-cost, or “dumped,” imports from the  country — lapse.

The recommendation by the commission, the EU’s regulatory arm, for a 15-month extension of the duties is a compromise resulting from evidence that dumping continues and from a split within the 27-nation bloc over the case. The EU normally prolongs anti-dumping duties for five years.

“We will carefully consider what we heard today from the member states and will take that into account when preparing our formal proposal for governments, which are responsible for the final decision,” commission trade spokesman Lutz Guellner said by telephone from Brussels, where the national officials discussed the matter.

At stake is protection from cheaper imports for 8,000 European leather-shoe manufacturers, mainly small businesses in southern Europe. Four-fifths of the EU’s leather shoes come from Italy, Portugal and Spain, which face objections to the trade protection from northern nations.

The EU’s 2006 decision to impose the levies on 9.7 billion euros ($14.4 billion) of Chinese and Vietnamese footwear for two years was a compromise because anti-dumping measures are usually applied for five years. The levies are 16.5 percent against China and 10 percent against Vietnam.

Since early October 2008, when they were originally due to expire, the duties have automatically stayed in place while the EU considers whether to re-impose them. Such reviews must be completed within 15 months.

Bloomberg, November 19, 2009.