Shrimp exports may decline in February due to raw material shortages

Despite strong growth in the first month of 2025, Vietnam’s shrimp exports are facing major challenges related to raw material supply and uncertainties in the U.S. market.

In January, shrimp was one of the few seafood products that saw an increase in export value. According to the Vietnam Association of Seafood Exporters and Producers (VASEP), shrimp exports reached USD 300 million, up 24% year-on-year. Since shrimp accounts for the largest share (39%) of Vietnam’s seafood exports, its growth also lifted the overall seafood export value by 3%.

This follows the double-digit growth trend of 2024, when shrimp exports increased by 14% to USD 3.9 billion, supported by strong demand from key markets such as the EU, China, and the U.S. The year-end holiday season in the U.S. and EU, along with Lunar New Year demand in China, contributed to a surge in orders.

However, the shrimp sector now faces significant raw material shortages, coupled with uncertainties in the U.S. market.

Risk of raw material shortages

According to the Ministry of Agriculture and Rural Development, in 2024, the area for brackish water shrimp farming was estimated at 737,000 hectares, yielding nearly 1.3 million tons, an increase of 5.3% from 2023. Projections for 2025 indicate that the farming area will expand to 750,000 hectares (+1.8%), with production expected to reach 1.29 million tons (+2%).

Despite this growth, VASEP notes that 2024 was a challenging year for the shrimp industry. Market fluctuations, particularly the continuous decline in raw shrimp prices, at times hitting record lows, forced many farmers to cut back on production or even abandon their ponds.

While shrimp prices plummeted, feed costs rose, leaving farmers struggling with low or negative profit margins. The first half of 2024 saw shrimp prices continue to drop across most sizes, coinciding with peak stocking periods in the Mekong Delta.

Beyond price challenges, unfavorable weather conditions, environmental factors, and disease outbreaks further complicated shrimp farming.

“Although the shrimp industry maintained growth in 2024, both farmers and processing businesses are facing difficulties due to raw material shortages,” VASEP stated.

Minh Phu, Vietnam’s largest shrimp exporter, serves as an example. Despite strong revenue growth, the company posted losses for the second consecutive year.

In 2024, Minh Phu reported revenue of VND 14.73 trillion, a 38% increase from 2023. However, it recorded a net loss of over VND 235 billion, extending its VND 100 billion loss from the previous year. The company’s gross profit margin shrank from 16.8% in 2023 to 7.6% due to rising production costs.

At Sao Ta, another leading shrimp exporter, executives noted that profits could have been better if shrimp farming conditions were more favorable and the company had not been affected by the U.S. anti-dumping (AD) and countervailing duty (CVD) investigations.

In a letter to shareholders at the start of 2025, Ho Quoc Luc, Chairman of Sao Ta Foods, stated that the company’s 2024 export revenue grew by 25%, nearly double the industry average. However, he admitted that “profit growth did not match expectations.”

“While Sao Ta’s shrimp farms produced good yields, the shrimp were smaller in size and fetched lower prices. At the same time, farming costs rose as we had to implement stricter pond management to prevent disease outbreaks. This resulted in minimal reductions in final product costs,” Luc explained.

Additionally, unexpected developments in the AD and CVD cases left the company unable to account for its 2024 CVD tax provisions (VND 10 billion) and 2023 AD taxes (VND 38 billion), which negatively impacted its profits.

“Without these uncertainties and disruptions, our profits would have been more stable,” Luc noted. However, he added that Sao Ta’s subsidiary, Khang An Foods (KAF), saw unexpected growth, helping the company exceed its profit targets.

In 2024, Sao Ta reported VND 6.91 trillion in net revenue and VND 423 billion in net profit, up 36% and 40% year-on-year, respectively. “This year has started with extremely complex challenges in both domestic and international markets,” Luc remarked.

“The shrimp farming situation is difficult due to severe disease outbreaks affecting yields. Farmers will suffer losses because production costs remain high. Meanwhile, for exporters, limited raw material supply is driving up input costs, making it harder to compete. This year, raw material shortages will be a major concern,” he warned.

Luc also pointed out that while exporters still have orders, raw material availability remains low, and high input costs reduce competitiveness.

“The increase in shrimp exports in January was largely due to leftover inventory from last year being delivered under existing contracts. However, exports may decline from February onward as stocks run out,” he said.

Uncertainties in the export market

Another major concern for shrimp exporters is the unpredictability of global trade policies, particularly in the U.S.

Last year, the U.S. launched countervailing duty investigations into frozen warm-water shrimp imports from India, Ecuador, Vietnam, and Indonesia.

As a result, the U.S. imposed import duties ranging from 5.63% to 5.87% on Indian shrimp, 3.5% to 4.4% on Ecuadorian shrimp, and 2.84% on Vietnamese shrimp, while Indonesian shrimp remained duty-free. However, one Vietnamese exporter faced an extraordinarily high tariff of 221.82%.

The potential re-election of Donald Trump as U.S. president has added further uncertainty to the trade outlook.

“Everything is becoming more unpredictable. We don’t know which country will be targeted with new tariffs next. Vietnam has a trade surplus with the U.S., whereas competitors like India and Ecuador do not. Since their shrimp prices are significantly lower, if the U.S. imposes additional tariffs on Vietnamese shrimp, our industry will face serious challenges,” Luc commented.

While Vietnam specializes in high-value, processed shrimp, its market share remains small compared to the low-cost shrimp from Ecuador and India. If tariffs increase, consumers may shift to cheaper alternatives, he warned.

In 2024, Vietnam’s shrimp exports to the U.S. totaled USD 756 million, up 11% from 2023, making it the second-largest export market (accounting for 19% of total exports). Shrimp exports to the U.S. declined only in Q2 but saw positive growth in the other three quarters, with an upward trend in the second half of the year.

To mitigate risks from the U.S. market, Sao Ta is planning to diversify its export destinations, with a focus on expanding in the EU while maintaining Japan as a key strategic market.

According to VASEP, in order to boost competitiveness and achieve growth targets in 2025, the shrimp farming sector needs better support, such as easier access to bank loans and the issuance of water surface usage permits to allow farmers to secure financing. Additionally, stricter regulations are needed to control the circulation and sale of low-quality shrimp seed.

VASEP has also urged the government, the Ministry of Foreign Affairs, and the Ministry of Industry and Trade to intensify economic diplomacy, bilateral negotiations, and targeted trade promotion efforts to create more favorable conditions for shrimp exports.

Japan remained one of Vietnam’s top shrimp importers in 2024. However, VASEP warns that Indonesian shrimp, facing high U.S. tariffs, may redirect to Japan, potentially displacing Vietnamese shrimp in this key market. To counter this, the association suggests accelerating negotiations with South Korea to remove import quotas on Vietnamese shrimp under the VKFTA, aiming for a 0% tariff rate.

Source: https://vietfishmagazine.com/