Da Nang manufacturing businesses are continuously faced with major challenges due to the severe shortage of imported raw materials and continuing price increases. The raw material crisis has a significant impact on production plans of local businesses by the end of this year and in the first months of 2022.

Picture is taken at the Da Nang Rubber Joint Stock Company located in Hoa Khanh Industrial Park in Lien Chieu District. Photo: KHANH HOA

At the Da Nang Rubber Joint Stock Company, the source of rubber has always guaranteed from domestic supply chains while other input materials, especially chemicals, are completely dependent on imports, mainly from China and India.

Mr. Le Hoang Khanh Nhut, the Director General of the Da Nang Rubber Joint Stock Company, said that prices of imported raw materials for the rubber industry are fluctuating strongly, with a rise of 10-15% compared to several months ago.

Mr Nhut said that we could see price increases continue on imported raw materials in the first months of 2022. The Da Nang Rubber Joint Stock Company is under significant pressure due to fluctuating raw material costs, he remarked.

Fishing industry is under double the pressure than other industries as it's just not rising raw materials costs but also the impact of fuel prices is on the transportation cost of raw materials from other localities nationwide. As a result of the COVID-19 pandemic, many Da Nang seafood businesses are facing a serve shortage of raw materials. Therefore, they are hesitant to maximize their production capacity during peak production periods even though they have resumed their production activities for nearly two months. They are at greater risk of delayed deliveries of their contract products or even compensation coverage for their customers.

Lack of raw materials causes many businesses to operate at moderate level instead of pushing their production capacity to the maximum. Picture is taken at the Bac Dau Company located in the Da Nang Seafood Service Industrial Park. Photo: KHANH HOA

Worldwide prices for raw materials are on rise that has resulted in the sharp fluctuation in the prices in recent months, many Da Nang businesses said.

With Viet Nam’s trade openness, most Da Nang businesses still rely heavily on imported raw materials in manufacturing their products, and the impact of price fluctuation of raw materials on them is inevitable. Raw material prices are forecast to continue to increase until the end of this year. However, resumed global supply chain and convenient freight transportation nationwide in the near future will further result in downward pressure on raw material prices.

Local businesses believe that functional bodies focus on taking price control measures to control or affect the prices of imported raw materials, as well as taking all necessary steps to reduce freight costs, contributing to lowering prices of goods, and restrain price increases on raw materials. This will help businesses quickly recover from the COVID-19 crisis, catching up with global trend of recovery.

In their efforts to overcome difficulties caused by the impact of the sharp fluctuation in raw material prices, many Da Nang manufacturing businesses have proactively adopted flexible solutions to ensure the continuation of the production. The focus will be on increasing productivity in the workplace as well as reducing input costs to compensate for the increase in raw material prices. In addition, the heed will be paid on actively seeking sources of raw materials from many countries worldwide in order to ensure a secure and sustainable supply of raw materials for Da Nang manufacturing businesses. All these factors will help Da Nang businesses maintain stable production and achieve growth.

Reporting by KHANH HOA – translating by H.L