Vietnamese businesses struggle amid a spiral of rising costs

Rising energy prices are pushing up input costs while output demand remains weak, forcing businesses to manage cash flow and keep production running despite margin pressure.

Energy-driven cost volatility spreads across the supply chain

Đào Trọng Khoa, chairman of the Vietnam Logistics Association, said cost fluctuations have become more frequent and unpredictable, changing daily rather than following monthly or quarterly patterns. He noted that even routine activities, such as opening an email, can trigger new cost items, including insurance premiums, freight charges, and multiple surcharges—making recently completed financial plans quickly outdated.

The pressure began with energy prices and then spread across the economy. On March 19, the price of gasoline RON 95-III rose to 30,690 dong per liter and diesel to 33,420 dong per liter, up 52% and 73% respectively from the end of February. Gasoline also increased by 2–3 times, adding 50,000–70,000 dong per 12 kg cylinder, which in turn lifted transport and production costs.

By March 27, after tax reductions, prices fell sharply: RON 95-III decreased by 5,620 to 24,330 dong per liter, while diesel fell by 970–2,450 dong per liter. However, price levels remained well above pre-conflict levels, with gasoline about 21% higher and diesel about 84% higher than at the end of February. Prices rose again afterward, with RON 95-III at 25,150 dong per liter and diesel at 40,820.

Businesses struggle to pass higher costs to selling prices

Nguyen Ngoc Hoa, chairman of the Ho Chi Minh City Enterprise Association, said gasoline and oil are inputs for many industries, so higher fuel prices raise logistics, transport, and goods costs. He cited that international shipping routes reported cost increases of 2–3 times, while domestic transport faced similar pressure.

However, the biggest challenge is not only that costs rise, but that many firms cannot pass those increases through to selling prices. At Mebi Farm Joint Stock Company, CEO Lam Thuy Ai said input costs rose continuously in overlapping waves while purchasing power fell by about 30%. In livestock production, feed costs account for more than 70% of production costs, pushing total production costs up by about 35%, while egg prices remain low due to weak demand. She said the firm’s ability to absorb losses has nearly been exhausted.

Sector-by-sector impacts: feed, fertilizer, and export demand

In fertilizer, Vu Dinh Tuan of Ca Mau Fertilizer Company said input costs rise sharply with oil prices. He added that international logistics costs increase by 20–30% and domestic costs by 15–20%. For every $10 increase in oil, company costs rise by about 525 billion dong.

Even so, firms cannot adjust selling prices accordingly due to concerns about pressuring farmers. Vu Khanh Thien of Phu My Fertilizer said domestic fertilizer prices have risen about 20%, but companies still aim to keep prices below world levels to support agricultural production.

Export-oriented industries are also facing cost pressure alongside cooling demand. Pham Van Viet, chairman of Viet Thang Jean, reported raw material costs up 8–18% and container shipping costs up an additional 4,000–5,000 USD, while demand in major markets has weakened. As a result, firms are trying to keep prices stable to preserve orders.

How companies are responding

Across sectors, the common pattern is that input costs increase faster than outputs can adjust. With weak demand, much of the cost burden remains with firms. Companies are responding by reforming operations, though their flexibility is limited.

At Mebi Farm, Lam Thuy Ai said the company is tightly controlling inventories, shifting toward make-to-order production, and only modestly adjusting selling prices—about 10% for some processed seafood products. Fresh egg prices cannot be adjusted. For products made from existing lower-cost stock, the firm maintains prices to stabilize the market.

In fertilizer, Vu Dinh Tuan said firms operate at high capacity to optimize production costs and negotiate with transport partners to control logistics costs. When domestic demand weakens, companies push exports of urea and NPK to maintain capacity and cash flow. They also urged authorities to lower fertilizer export taxes from 5% to 0% to improve international competitiveness.

In textiles, Pham Van Viet said firms are splitting orders, restricting air shipments, and diversifying markets to reduce dependence on large markets.

In logistics, firms are moving toward proactive risk management. FIATA recommends reviewing contract terms, updating surcharges and real-time insurance to hedge against price volatility, and building flexible routing to support multi-modal transport. These steps may not reduce costs immediately, but they are intended to help firms cope with volatility.

Policy measures and longer-term energy transition

In response to higher energy prices, the government is calling for ensuring supply, increasing imports from stable markets, and operating domestic refineries at full capacity.

Fiscal measures have also been deployed to cool prices, including reducing import taxes on gasoline and diesel to 0% during 9 March–30 April. Environmental protections for gasoline and diesel are set to 0 dong per liter (reducing 1,500–2,000 dong per liter) from 27 March to 15 April. Excise taxes on gasoline are also set to 0%, with VAT not required to be declared but deductible.

According to the Ministry of Finance, these measures reduce monthly budget revenue by about 7.2 trillion dong, while helping lower costs for citizens and businesses and limiting broader inflation and price-level effects.

Longer term, Pham Binh An, deputy director of the Ho Chi Minh City Development Institute, said today’s cost pressures also highlight risks from dependence on fossil fuels. He argued that transitioning to alternative energy sources—especially electricity and renewable energy—could help firms manage costs more proactively and reduce future risk.