Tran Doan Hung, representing Co May Duc Hung Company Limited in Thanh Hoa Province, recently encountered an unexpected crisis linked to the tensions in the Middle East. A foreign partner had ordered a shipment of handmade water hyacinth baskets for interior decoration, destined for Germany and other European markets.
However, once the products were finished, geopolitical shifts caused logistics and trade costs to soar, forcing the partner to suspend the import plan. Hung shared that the customer requested assistance in reselling the shipment within Vietnam at cost price to recover a portion of the expenses.
To clear the inventory, the business has shifted focus to the domestic market by using social media platforms to find individual customers. This transition from a wholesale export model to domestic retail is difficult, as it involves additional costs for marketing, small-scale shipping, and customer service, leading to lower efficiency than expected.
The pressure is not limited to handicrafts. Agricultural exporters are facing similar strain. Commodities with large markets in the Middle East, such as pepper, spices, and cashew kernels, are being affected as prolonged instability in that region reduces import demand.
Cao Thuc Uy, director of Cao Phat Company Limited, said the cashew processing industry faces significant risks as global consumption shows signs of slowing. According to Uy, production costs include not only raw materials but also packaging, cartons, and other supplies. Over the past decade, total input costs have increased significantly, tightening profit margins.
Cashew exports face risks due to Middle East instability (Photo: Huan Tran).
Meanwhile, the conflict in the Middle East continues to disrupt international trade. This region accounts for approximately 10 to 12 per cent of global cashew kernel demand. If instability persists, a sharp drop in demand could directly impact exporters.
Uy noted that his factory can process about 6,000 tonnes of raw cashews per month at full capacity. With current prices, the cost of purchasing raw materials alone reaches tens of billions of dong. For instance, a typical monthly purchase of VND 30 billion (USD 1.18 million) carries immense risk if the market turns.
Rising fuel costs are adding further pressure. Uy said securing oil to operate machinery is increasingly difficult. In previous years, the firm purchased 20,000 litres of oil annually, but this year it has been forced to buy from small, individual petrol stations. Transport costs from the border to the factory have also risen sharply due to fuel prices.
Even for orders already paid for by markets such as Turkey or Israel, businesses are hesitant to ship goods due to transport risks. In response, many firms are proactively reducing capacity, being cautious with new contracts, and seeking domestic outlets to maintain cash flow.
Tightening risk management
As global logistics chains remain impacted by geopolitical hotspots, industry associations are advising firms to exercise extreme caution. Hoang Thi Lien, president of the Vietnam Pepper and Spice Association, said the pepper industry is entering its peak harvest season. This is usually the busiest time for international trade, but current instability creates risks for supply chains and international payments.
The association recommends that businesses pause new transactions with partners in high-risk areas. For existing contracts, firms are encouraged to negotiate delivery delays to minimise the risk of incidents during transit.
The Vietnam Pepper and Spice Association advises businesses to temporarily avoid new transactions with partners in high-risk areas (Photo: Huan Tran).
Ngo Khac Le, deputy secretary general of the Vietnam Logistics Business Association, identified three main risk groups: energy, logistics, and exchange rates. One concerning scenario is the "end of voyage" clause, where shipping lines unilaterally terminate a journey and unload cargo at an unplanned port due to force majeure events like war.
If cargo is unloaded at an unscheduled port, businesses must review their international commercial terms to determine liability and costs. Options include continuing transport to the destination, diverting to an alternative port, or finding new buyers at the current location. Experts also urge firms to check insurance contracts to see if current geopolitical risks are covered before signing new agreements.