Businesses are miserable because foreign partners default on contracts.

Price increase, cancel delivery

On the afternoon of May 31, the Vietnam Cashew Association (Vinacas) held an urgent meeting to provide information on the situation of raw cashew material suppliers from Africa unilaterally canceling contracts en masse.

According to Vinacas, cashew processing and export in the first months of 2024 went quite smoothly. However, recently, after the International Nut and Dried Fruit Council (INC) announced that raw cashew production in Africa decreased by about 7% due to adverse weather conditions, some raw material suppliers used crop failure as an excuse to not deliver or requested a price increase according to the current increase before continuing to deliver.

In just over a month, the price of raw cashews has been pushed up to 1,500 - 1,600 USD/ton, an increase of nearly 50% compared to before.

Mr. Nguyen Minh Hoa, Vice President of Vinacas informed: At the time when Vietnamese enterprises signed contracts to purchase raw materials (the second half of February and March 2024), the price of raw cashew nuts was at 1,000 - 1,100 USD/ton. However, within just over 1 month, the price of raw cashew nuts was pushed up to 1,500 - 1,600 USD/ton, an increase of nearly 50% compared to before. This is an unprecedented development.

Mr. Ta Quang Huyen, General Director of Hoang Son 1 Company, said: "In the 2024 cashew crop, Hoang Son Company signed a contract to import 52,000 tons of raw cashews from West Africa with a delivery period of April - June 2024. However, up to now, the enterprise has only been delivered about 25,000 tons at the original price; about 15,000 tons are being negotiated by partners to increase prices or deliver goods with reduced quality; the remaining about 10,000 - 12,000 tons have been confirmed to have been canceled for delivery".

"Not all, but there was a raw cashew export partner in West Africa who canceled the order and did not deliver the goods; there was a business that had loaded the goods on board but did not deliver the documents for the Vietnamese business to receive the goods. Some sellers are asking the buyer to increase the price, otherwise they will sell to other customers. There are also cases where the partner only delivers a part of the signed order, the rest requires an increase in price according to the new price or delivers goods of lower quality than the original agreement," Mr. Ta Quang Huyen was upset.

Speaking to Thanh Nien from Thailand, Mr. Vu Thai Son, Chairman of Binh Phuoc Cashew Association, General Director of Long Son Company, confirmed: "The situation of unilateral contract cancellation, delayed delivery, and intention to cancel contracts is happening widely, almost all cashew processing enterprises are affected. Information about crop failure and reduced output in Africa, along with the Ivory Coast stopping the export of raw cashews to prioritize supplying raw materials to domestic factories, has caused contract 'defaults' to occur everywhere."

Severe consequences

According to Mr. Vu Thai Son, with the disruption of the supply of raw cashew nuts, many Vietnamese enterprises may not have enough goods to fulfill export contracts, because processing enterprises have also signed export orders for cashew nuts based on the purchase price of raw cashew nuts. With the current price increase, processing enterprises cannot balance the selling price and will have to suffer great losses.

Even though the selling price of cashew nuts has been adjusted to increase, it is still about 15% slower than the price of raw cashew nuts, making it impossible for manufacturing enterprises to balance.

If the partners refuse to deliver, Vietnamese enterprises will not have goods to deliver to cashew nut importers in Europe, America, etc. The most worrying thing is that in the third and fourth quarters of this year, there will be no export goods. From there, contract disputes will erupt between Vietnamese enterprises and foreign cashew nut roasters and supermarkets. We are at risk of being fined for contracts, losing reputation, and losing export markets.

Mr. Nguyen Minh Hoa, Vice President of Vinacas

Mr. Nguyen Minh Hoa said that the key problem lies in the fact that Vietnam is the world's leading cashew nut processing and exporting country; the annual processing capacity is about 3.5 - 4 million tons of raw cashew nuts, but domestic supply is increasingly decreasing, up to now only meeting about 10% of raw material demand for processing, the rest must depend on imports.

In particular, the amount of raw cashews imported from West Africa accounts for 70% of the total amount of raw cashews imported. Therefore, if the situation of price gouging and price fixing continues, the risk of shortage of raw materials for processing will appear in the second half of the third and fourth quarters of this year and affect the first quarter of 2025.

Mr. Cao Thuc Uy, CEO of Cao Phat Company Limited, informed: "Each year, Cao Phat imports about 80,000 tons of raw cashews from different sources; of which, West Africa accounts for the majority. Up to now, raw material purchase contracts signed from the beginning of the 2024 cashew crop have only received about 70% of the goods and the quality is also lower than the standard. The raw cashew market in previous years still fluctuated, but only at a rate of 10 - 20% for a year, an increase of 45 - 50% in a short time is unprecedented in the history of the cashew industry up to now. Meanwhile, the selling price of cashew nuts, even though adjusted to increase, is still about 15% slower than the price of raw cashews, making it impossible for manufacturing enterprises to balance".

Agreeing with the above statement, Mr. Ta Quang Huyen admitted: "The situation of non-compliance with contracts is causing many difficulties for Vietnamese cashew processing enterprises. When Vietnamese enterprises lack raw materials for processing, the supply of cashew nuts exported to the world will also be disrupted, affecting roasters and distribution systems worldwide."

On Vinacas's side, Mr. Bach Khanh Nhut, Permanent Vice President of Vinacas, proposed a solution: "In the context of many complicated market developments, Vinacas recommends that businesses make every effort to ensure maximum processing and delivery activities in accordance with signed contracts. In case there are not enough raw materials, negotiate and discuss with cashew nut buyers so that customers can clearly understand the situation and share difficulties. Vinacas also hopes that the West African Cashew Exporters Association will consider and support, reminding its members to properly implement the signed raw material supply contracts, in order to build a sustainable cashew supply chain, bringing benefits to all parties."

Source: https://thanhnien.vn/doanh-nghiep-dieu-khon-kho-vi-doi-tac-ngoai-xu-hop-dong-185240601082040325.htm