Six commodity groups to gain from Vietnam-US relationship upgrade
Six commodity groups will particularly benefit from a trading uptick as a result of Vietnam-U.S. relations being elevated to a comprehensive strategic partnership.
Nguyen Ngoc Quynh, deputy general director of the Mercantile Exchange of Vietnam (MXV), tells Theinvestor that the six commodity groups are livestock products, coffee, textiles, steel, gas, and petroleum.
According to the General Statistics Office, in the first eight months of the year, Vietnam's export turnover to the U.S. was $62.3 billion. Meanwhile, Vietnam spent $9.3 billion on importing goods from that market. In the same period, the U.S. was Vietnam's largest export market and its second-largest trading partner.
These figures make the relationship upgrade, from a comprehensive partnership to the highest level of comprehensive strategic partnership, a logical step taken during U.S. President Joe Biden's recent Vietnam visit.
Raw materials supply
Quynh said that the first commodity group to benefit from the upgrade would be livestock. Vietnam depends on imports for 60–70% of input materials in animal feed production, which poses a long-term problem for manufacturing businesses and small households when supply in major producing countries is disrupted, causing raw material prices to increase.
The volume of soybean meal and wheat imported from the U.S. to Vietnam increased by 8% and 12%, respectively, in 2022. Although the proportion was still lower than traditional markets such as Brazil, Argentina or Australia, the U.S. is still an important, potential market for Vietnam's livestock industry.
After a period of continuous supply chain disruptions, increasing cooperation with the U.S. would make sense, given that achieving supply autonomy is a distant possibility at present.
The upgraded relationship with the U.S. will not only help Vietnam have more raw material supply options for the livestock industry, but also increase local production and trade.
Coffee export
The second beneficiary commodity group would be coffee. The U.S. is currently one of Vietnam's three largest coffee buyers.
As of August this year, Vietnam exported more than 90,500 tons of coffee to the U.S. for a turnover of about $214 million, according to the General Department of Customs.
The relationship upgrade will give Vietnam the opportunity to maintain exports to this large market in the context of the U.S.'s tendency to reduce import of robusta coffee.
Cotton costs
The third commodity group to benefit from the Vietnam-U.S. relationship upgrade would be textile, Quynh said.
According to the General Department of Customs, the U.S. has been Vietnam's largest export market, with a turnover of nearly $10 billion in the first eight months of this year.
Another textile-related benefit for Vietnam can come from cotton. Currently, natural cotton for Vietnam's textile and garment production is mainly imported from the U.S.
With the relationship upgrade, cotton imports from the U.S. could enjoy special preferential tax rates in addition to the 5% incentive from the most favored nation (MFN) status. This can help reduce input material costs, creating opportunities to reduce costs and increase price competitiveness.
Steel exports
In the first six months of this year, Vietnam exported about 5.4 million tons of steel, with U.S. as the third largest market, accounting for a market share of about 8.8%, behind ASEAN (31.6%) and the EU (25.2%).
In June, steel exports to the U.S. rose three times compared to the previous month.
Although steel is not a major export product for Vietnam, exports to the U.S., a demanding market, are expected to increase significantly as a result of the comprehensive strategic partnership.
In the coming time, Vietnam can benefit from U.S. cooperation and support in terms of trade defense measures and dealing with anti-dumping and anti-subsidy lawsuits. “Trade defense is a huge obstacle for our country's steel industry, which faces regular trade lawsuits,” Quynh said.
In addition, Vietnam can benefit via technology transfer from the U.S. in terms of steel production, improving the competitiveness and quality of Vietnamese steel.
Liquid natural gas
With Vietnam's energy demand expected to increase between 8.5% and 9.5% per year over the next three years, the upgraded relationship with the U.S. can help develop the domestic green energy industry, especially in terms of gas and LNG supplies.
Vietnam is trying to increase its oil and gas supplies, develop natural gas-fired power plants and lessen reliance on coal-fired ones. As Vietnam's third-largest gas supplier, the U.S. is emerging as a key partner.
In 2022, Vietnam imported 2.5 million tons of petroleum gas and hydrocarbon gas worth $1.9 billion. Vietnam's gas imports from the U.S. reached 377,000 tons, equivalent to $313 million, accounting for 16.5% of the total, second only to China with 17%.
Oil exploitation
The new heights scaled by Vietnam-U.S. relations can open up opportunities for Vietnam to receive foreign investment in domestic oil exploitation activities. Vietnam and the U.S. have been implementing several cooperation projects in this field, including oil and gas exploration.
Many large American oil and gas corporations are present in Vietnam, including ExxonMobil, Murphy Oil, and Chevron. Last year, a large American corporation operating in the field of oil and gas exploration, Murphy Oil, invested $300 million in Vietnam.
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