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Vietnam's fuel importers under increasing strain from record low currency, tight credit


Domestic refineries boost output above capacity in bid to ease shortages

Number of companies importing oil products nearly halves to 19

Government considering credit lines, preferential rates to help importers

  • Author
  • Ramthan Hussain    Joshua Ong    Staff    Newsdesk-Vietnam
  • Editor
  • Wendy Wells
  • Commodity
  • Oil

Vietnam's oil product importers are struggling to buy from the global market as the dong plunges against the dollar and bank credit tightens, deepening their reliance on domestic refineries that are ramping up production above capacity in a bid to alleviate critical fuel shortages in a regulated retail market, trade sources said Oct. 25-26.

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The dong has fallen nearly 10% against the dollar since end-January to touch a record low of Dong 24,888 Oct. 25, making it difficult to access foreign currencies, even as fuel import prices have doubled or tripled from previous years, sparking fears of spiraling debt burden and inflation.

While other Asia-Pacific economies were also struggling with high energy prices, supply disruptions, shortages and a strong dollar, forcing regulators to intervene, in Vietnam, the number of companies importing oil products in October has almost halved to 19 from 36, a source said, citing a Ministry of Industry and Trade report.

Banks have recently tightened lending policies, requiring fuel buyers to open letters of credit in order to get dong-denominated loans and charging fees for both dong loans and L/Cs.

Many small importers have failed to borrow dollars or open L/Cs with banks, prompting companies to maintain fuel inventory reserves only just in line with regulations as they grapple with losses.

"Many small and/or private oil importers have had to focus on squeezing Dung Quat's and Nghi Son's cargoes because they can't import," the same source said, referring to the two domestic refineries that supply 70%-80% of the domestic market and are operating above capacity.

The 130,000 b/d Dung Quat refinery in Quang Ngai province boosted runs to 109% from 107% Oct. 19 to help cover shortages at many fuel stations, especially in the import-dependent southern regions, the company owned by state-run Binh Son Refining and Petrochemical said.

NSRP, operator of the 200,000 b/d refinery at Nghi Son, said Oct. 25 the refinery will operate at full capacity in Q4 to ensure domestic supply.

The Chairman and Director of Cat Lai Oil Refinery-Saigon Petro, Pham Van Thoai, said the Russia-Ukraine conflict and Typhoon Nauru in late September had made it difficult to import and transport cargoes as premiums were high.


While fuel price increases at the start of the second quarter yielded profits, businesses suffered losses in Q3, Pham said, adding his company's H1 profit would not cover its losses in July-August.

Despite incurring losses, Saigon Petro imported one cargo in October to meet demand and supplement domestic supply, he added.

With import costs rising from Dong 306/liter in Q1 to Dong 450/liter in Q2 and Dong 967/liter in Q3, businesses were losing Dong 667/liter in Q3, the official said, adding the loss in Q4 was Dong 1,100/liter.

Over January-September, Vietnamese companies bought 17.238 million cu meters of oil products from domestic production and imports.

In Q4 they are required to buy at least 5.5 million cu m, including 2.248 million cu m of gasoline and 3.133 million cu m of diesel, the Director of the Ministry of Industry and Trade's Domestic Market Department, Tran Duy Dong, told a meeting with the industry and trade minister Oct. 24.

Petrolimex Chairman Pham Van Thanh told an earlier meeting with the minister that sales over January-September were up 8% year on year at 10.12 million cu m, while estimated losses were Dong 780 billion ($31.9 million).

He suggested the ministry review the number of oil importers and distributors to improve management.

Saigon Petro's Pham called for an accurate calculation of business costs to mitigate losses, adding that although the finance and trade ministries had recently agreed to increase the cost of transporting domestic gasoline to ports and premiums in the country, his business has lost so much it was difficult to get a bank loan.

Saigon Petro currently has to use its own capital to purchase oil products, he added.

The transport official proposed revising expenses more regularly, potentially every six months, which are included in the base price calculated by the ministries every 10 days to set the retail price.

The Director of the Department of Domestic Market, Tran Duy Dong, said a number of oil retail and companies had sought to close businesses in Ho Chi Minh City, An Giang and Dak Lak due to unstable supply.


Retail fuel shortages were being exacerbated by some key companies in the south being stripped of oil trading licenses for up to 1.5 months due to administrative violations.

Deputy Minister Do Thang Hai said the businesses, which have long faced import losses, must get support through proper credit lines, preferential interest rates and foreign currency sources to reduce costs and ensure market supply.

Persistently low pump prices were continuing to support Vietnam's gasoline demand, sources noted. Petrolimex raised the RON 95 gasoline price by 1.5% to Dong 22,340/liter Oct. 21 after an earlier slight increase Oct. 11, while E5 RON 92 gasoline was reduced 0.9% to Dong 21,290/liter.

Vietnam's gasoline imports surged 91% month on month and 537% year on year to 147,923 mt in September, customs data showed. Overall oil product imports jumped 35% on month and 105% on year to 627,652 mt, with jet fuel up threefold on year, gasoil up 59%, fuel oil down 12.4% and LPG up 15.2%.

However, the rising dollar has limited the ability of smaller Vietnamese buyers to import gasoline in October, while larger buyers such as Petrolimex were still able to fund imports, market sources said.

"I think big Vietnamese players will not be so affected by the strengthening dollar," a trader said. "However, should the financial situation worsen, sellers may demand higher prices from Vietnamese buyers to compensate for any potential financial turbulence."