There are series of difficulties that businesses are facing in this business season, from the deluge of raw material price increases, difficulties in getting loans, to the critical power shortage situation, causing firms to be in passive state, etc
For many firms, especially wood processing, fishery processing, garment and textile firms, the production season in the end of the year is usually expected and carefully prepared to receive busy orders, but along with that is the fear from material price escalation.
Thanh, director of Kien Phuc Wood Processing and Export Company in Dong Nai complained that, over two days ago, a series of workshops that provide wooden bars to the company informed that the rubber wood from the plantations is now finished and they do not know when it will be in stock. Meanwhile, the similar woods such as acacia, cajuput are costing 3.2 million dong per cubic metre.
Price of rubber wood has exceeded five million dong per cubic metre (26mm thick), up by two million dong per cubic metre compared to last year, not cheaper than imported hardwoods. Moreover, there is no material for them to work with, the above director shared. Currently, the company is using the remaining wood in the warehouse, but for orders from now to the Lunar New Year, she said if there were no improvement to the situation, her company would have to negotiate and repurchase from other firms.
Perhaps textile businesses have never had to face so many difficulties like this year, when price of imported cotton soared up, along with the increase in foreign exchange rates. Price of cotton for forward transactions on New York market last Friday exceeded $1.1 per pound (1 pound = 0.45 kilogram), unprecedentedly high level in history, up by 50 percent over the same period.
October is also the peak time for export of aquatic products.
However, prices of tra fish and shrimp materials, according to many processing businesses in Mekong Delta provinces, are at high levels, tra fish price sometimes rises to 18,000 dong. Raw material cost increases, along with the dependence on imports of prices of bran, animal feed and other materials such as veterinary drugs, packing, etc. have led price of white meat tra fish to rise up by nearly $4 per kilogram.
General director of An Giang Agifish Nguyen Van Ky said to limit risk and ensure a stable input for production when raw material prices are unlikely to decrease, the company last week had to sign contracts with suppliers of material fish to the end of the year at the price of 18,200 dong per kilogram, not including food supporting costs to farmers.
For businesses in industries such as fishery, wood, garment and textile and footwear, etc. which export and earn foreign currencies, the benefit obtained from the five percent increase of dong/dollar exchange rate within the year is not enough to offset the increase of the production costs, from raw materials to machinery, equipments, which already rely heavily on imports, not counting the interests they need to pay for bank loans.
Although a series of input costs increase, it is not easy for businesses to push up prices of output products, especially for exporters, from agricultural, forestry, fishery sectors to industrial goods such as garment, textile, footwear, electronic, etc. since most of them are outsourcing. Increasing prices goes along with the risk of losing customers.
Finding solution for the business to the end of the year is very difficult, concerned a firm leader.
Another difficulty is the shortage of power, which is predicted to become harsh from now to the dry season next year. Many firms are preparing generators to maintain production. The investment and regular use of generators also mean production costs, which are already high, would continue to climb up.
General director of Saigon 3 Garment Joint Stock Company said with the current six garment factories, the company needs to buy six high capacity generators (from 30kW, which costs over 110 million dong each). Of course, the spending on the operation of generators would again be added to the cost burden of the company.
Thanh from Kien Phuc Wood Processing and Export Company added that before the rising trend of raw materials prices in the peak season, her company must consider purchasing materials for reserves, at double the volume or higher than the normal reserve level.
Nevertheless, since the capital is mainly in circulation, production or deferred payments, firms usually have to borrow. Apart from large firms, with high prestige, the rest are medium and small firms with equity capital of less than 10 billion dong, accessing bank loans thus is often very difficult for them.
In the last months of the year, firms usually need more capital to buy raw materials for production, or to expand and upgrade equipments, workshops, and to increase capacity. However, they face many difficulties when getting bank loans, sometimes business opportunities were missed or production was delayed.