Vietnamese Taiwanese Businesses: War Impacts Soaring Freight Costs, Orders Temporarily Increase Instead of Decrease Due to Inventory Rush

The Vietnam Ministry of Finance's General Statistics Office announced on the 4th that Vietnam's Consumer Price Index (CPI) in March rose by 1.23% compared to the previous month, influenced by soaring global fuel costs and rising construction material expenses. The March index also saw a significant 4.65% increase compared to the same period last year, marking the highest record for that month in five years. Price pressures expanded, with transportation prices leading the increase. Due to supply disruptions caused by the Middle East conflict, domestic gasoline prices in Vietnam surged by 29.72%, diesel prices by 57.03%, and air passenger transport prices by 23.19%. Wei Hsin Printing & Packaging Industrial Co., established in 1992, has been deeply rooted in Ho Chi Minh City for over 30 years and has Taiwanese capital background. It produces cartons and paper boxes for international major clients such as Heineken, Coca-Cola, and Budweiser. General Manager Shen Hsien-yu stated in an interview with CNA on the 6th that the Middle East conflict indeed impacts the manufacturing industry. He mentioned that the biggest impact is the increase in freight costs, which have risen sharply since March. Among them, fuel prices increased by 125%, more than double the original price. Secondly, packaging costs, especially for petrochemical products like plastics, have nearly doubled, and sometimes goods are unavailable. Currently, the US-Iran conflict has led to an overall cost increase of about 10%. Shen Hsien-yu, who is also a board member of the Taipei School in Ho Chi Minh City and convener for the school building expansion, confirmed that construction material costs such as steel bars and cement have also risen by 10% to 15%. The school building contractor even suspended the quotation for the second phase due to uncertainty about the upstream raw material status. Shen Hsien-yu, also an honorary president of the Federation of Taiwanese Chambers of Commerce in Vietnam, pointed out that generally, manufacturing industries have inventory. Due to the emphasis on integrity, they will not suddenly raise prices for long-term cooperative clients to avoid damaging credibility. "Currently, the company's product pricing has not increased, and we are still absorbing the adjusted portion ourselves." For his company, orders have increased rather than decreased. "Now customers are placing orders faster than before, and orders are full, about 30% more than in previous years, because customers are also rushing to stock up and want to order our inventory first." The biggest impact is the uncertainty about the future. "Some customers know that prices are about to rise, and there's a bit of a tug-of-war. Everyone is waiting and watching, hoping that the Middle East situation will ease by the end of April or early May, and petrochemical products can gradually return to normal." In addition, the recovery period for some single-item products may be longer. For example, aluminum plates needed for printing, Qatar originally accounted for 20% of the global aluminum supply, but is currently under bombardment, and it may take 2 to 3 years to recover. Businesses are also observing whether the inflation rate in Vietnam will lead to a decrease in consumption, thereby affecting order reductions. However, Shen Hsien-yu stated that the end of April and early May coincide with Vietnamese holidays, and all consumer products are seeing increased orders. At this stage, inflation has not yet squeezed the wallets of Vietnamese citizens. He pointed out that Vietnam, unlike some other countries, does not have public panic about rushing to buy oil, as the state subsidizes fuel costs. "Currently, market consumption generally remains normal, and the government has also introduced policies. Although oil relies on imports, it is being purchased from different channels, and price gouging is being prevented, so the response is very efficient." For future development, Shen Hsien-yu is more optimistic. He pointed out that if companies and factories have been rooted in Vietnam for a long time, costs are relatively low, and fluctuations are relatively small. "I hope this crisis is short-term and ends soon. Companies with good fundamentals should have no problem getting through it." A survey released by international credit rating agency S&P Global on the 3rd also showed that the Middle East war led to a significant increase in manufacturing input costs in March, and sales prices rose at the fastest rate in nearly 15 years. The key is the impact of the Middle East war on inflation, with rising oil prices leading to increased freight, fuel, and transportation costs. The survey showed that Vietnam's Manufacturing Purchasing Managers' Index (PMI) remained above the 50-point threshold in March, but fell from 54.3 in February to 51.2, the smallest growth since September last year. Nevertheless, the survey still indicated that companies generally predict an increase in output over the next year, as potential demand is expected to remain strong and support new orders and output growth. (Edited by Hsieh Yi-hsuan) 1150406