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Saturday, July 20, 2024

Vietnamese exporters, importers worried on with shipping costs, strengthening dollar

The depreciation of the Vietnamese dong against the dollar and high shipping costs due to the ongoing Red Sea tensions have increased costs for both exporters and importers. The U.S. dollar is currently at VND25,350-25,590, up 1.9 percent since the beginning of the year and 8 percent from half a year ago.

Many importers are worried about the huge losses that come with the rising exchange rate. While the stronger dollar has led to higher revenues for exporters, those that need to import inputs for production are struggling with rising costs.

Than Duc Viet, CEO of garment firm Garco 10, said his firm might incur losses despite having enough orders to last until April. “Exchange rate depreciation boosts the value of exports. But it also drives up the costs of imported raw materials and machinery and equipment.” Concurring with this, Pham Van Viet, CEO of garment firm VitaJean, said shipping costs are higher if exporters pay in dollars. His firm’s shipping costs have gone up fourfold since the beginning of the year, he said.

In the long term, businesses are considering cutting costs and becoming less dependent on imported raw materials and feedstock. VitaJean is eyeing expansion into new foreign markets and cheaper sources of raw materials. It might also raise prices for its autumn-winter garment collections.

An executive of the Vietnam Logistics Association said the dong’s depreciation against the dollar and the Red Sea tensions have doubled or tripled shipping rates from Vietnam to Europe and the U.S.’s East Coast.

To mitigate losses due to exchange rate fluctuations, businesses should resort to financial derivatives such as currency hedging, according to finance and banking analyst Nguyen Tri Hieu. Should the exchange rate continue to fall, the State Bank of Vietnam should sell the dollar in the market and mop up the dong through treasury bills and bonds.

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