Vietnamese traders: Currency depreciation hurts profit margins

The Vietnamese dong is no exception among the Asian currencies, which fell to multi years low against the US dollar this month as the US Federal Reserve signals key interest rate increases.

But how does this hurts local petrochemical traders?

Theoretically, weaker local currency means suppliers who are selling in domestic term would increase their prices to cover the costs of cargoes purchases in US dollars. However, this is not the case in Vietnam market at the moment. Traders here find themselves unable to increase prices in the same pace as the depreciation of the dong amid weak demand and comfortable supply.

A trader informed, “We have 1,000 tons of material arrive this week, which need to clear payment. And we make a loss of approximate $24,000 in total just for the exchange rate. The main issue here is that we could not increase selling prices in domestic market. We are loosing confident in near term outlook.”

Other traders in the country are also complaining about the similar difficulties they faced, and many decided not to make fresh replenishment at the current import prices. One of the sources informed, “Our international suppliers are holding very firm on their cargoes despite weak buying interest. We are unable to accept LLDPE film near to $1200/ton threshold, as it is just too risky.”

Sentiment is badly affected and this condition might keep going in the coming days, players said.