Vietnam has been one of the few “anti-epidemic pacesetters” in Asia since last year, but this round of “Delta” mutant strains failed to hold on. At present, the total number of confirmed cases of COVID-19 in Vietnam has exceeded 160,000, and the number of new cases in a single day has basically exceeded 7,000 since late July. Ho Chi Minh City, the largest city and economic center, has become the center of this round of epidemic.
Ministry of Commerce warning: Vietnam’s textile and garment industry faces delivery Risks of delays and order loss
Recent news from the Ministry of Commerce. According to Vietnam’s “Investment News” report on August 4, Vu Duc Giang, chairman of the Vietnam Textile and Garment Association, said that due to the severe impact of the new crown epidemic Affected, Vietnam’s textile and garment industry faces severe challenges. In the southern region where the epidemic is most severe, a large number of textile and garment companies have suspended production. After many companies implemented the “three locals” (local production, local dining, local accommodation) model for a period of time, they were unable to persist because the cost of maintaining production was too high, production efficiency was low, and workers had to be arranged for food and accommodation. The pressure was so great that many factories were forced to suspend production. Some companies’ 19 factories were forced to suspend production completely because they were unable to implement the “three local policies.” Currently, only spinning, weaving, and printing and dyeing enterprises can maintain the “three local” model. The common feature of these enterprises is that they use a large amount of machinery and equipment, employ less labor, and it is relatively easy to arrange for workers to have on-site accommodation and meals. However, clothing production enterprises employ a large amount of labor, and some enterprises have tens of thousands of employees. It is not feasible to implement the “three local” model.
At the same time, under the complicated Covid-19 situation in August, Vietnam, the world’s second largest clothing exporter, is facing the risk of orders being taken away by competitors. Jiading Group JSC, located in the southern province of Binh Duong, has secured orders until the end of December, but faces higher material prices, delayed shipments and higher logistics costs. The company’s management board said it would be unable to fulfill its orders if the pandemic continues. More than 80% of garment and textile companies in the southern region had to reduce labor productivity or suspend production to fight the epidemic.
Vudejiang said production in August would be “extremely difficult”, especially for businesses in the southern region that are practicing social distancing. Word. Up to 90% of the production chain in the south has been broken. At the same time, only 70-80% of clothing and textile companies in the northern region are still operating. He said that the delivery pressure during this period is a big challenge for garment and textile companies. If they cannot deliver on time, their customers will cancel orders, which will affect production this year and next year. “If the Vietnamese market is unstable, partners will transfer orders (to other countries). Clothing is seasonal. Although outdated clothes are on sale, no one is willing to buy them,” Vu Duc Giang said. Vu Duc Giang said that demand from major clothing importing countries such as the United States and Europe is recovering rapidly, with order volume increasing by 16-17% year-on-year, and some varieties increasing by 30%. However, Vietnamese companies that cannot deliver goods on time will face penalties for breach of contract and the risk of breaking trust. It will also lead to loss of orders. Vietnam accounts for 30-40% of global exports of brands such as Nike and Adidas, and is currently facing the risk of losing share.
The Ministry of Industry and Trade of Vietnam stated that a large number of enterprises in southern Vietnam have suspended work and production, and have issued warnings to relevant provinces and cities. Industrial production slowed down, with the industrial production index in Ho Chi Minh City falling by 19.4% year-on-year in July, Long An Province falling by 14.6%, and Ca Mau Province falling by 13.7%. While enterprises in the south are facing severe difficulties, the epidemic situation in the north has been alleviated. Enterprises in Bac Giang and Bac Ninh provinces are resuming production, but the return rate of workers is only 80% at the highest. Since the outbreak of the fourth wave of the epidemic, many workers have returned to their hometowns to avoid the epidemic, and it is unlikely that they will return to the factory in the future. The Vietnam Textile and Garment Association believes that even if the epidemic is controlled in the future and provinces and cities reopen, the return rate of workers is expected to be only 60-65%. When the supply chain breaks and Vietnam is no longer a stable market, customers will transfer orders to other countries, which will seriously affect the mid- and long-term development of the textile and apparel industry. Vietnam’s apparel and textile companies face the risk of international customers delaying or canceling orders and shifting their focus to other countries. “Once it is under control, it will be very difficult to resume business relations and it will take time,” the ministry said.
Recurrence of epidemic in Vietnam
Xinyi Is the round of orders returning to China making it more difficult for the foreign trade market to receive orders?
World Health Organization Secretary-General Tedros Adhanom Ghebreyesus recently stated that in the four weeks of July, the number of confirmed cases around the world increased by 80%. “The epidemic that was finally controlled is almost out of control. The health care systems in many countries are overwhelmed.” Southeast Asia, where the Delta variant is raging, is currently the region hardest hit by the epidemic. Industrial output in seven Southeast Asian countries has recorded its largest contraction since May last year, with Indonesia and Malaysia the worst.
Indonesia is now in a semi-blockade state, and the economy has been hit hard. So far, nearly 3 million Indonesians have fallen below the poverty line. Indonesian President Joko still insists that for the sake of people’s livelihood, he will not completely lock down the country, and pointed out that a blockade may not be able to solve the crisis.
Malaysia reported 17 new additions on July 31There were 786 confirmed cases, a record high. According to the Manufacturers Association, about 1.2 million Malaysians are unemployed. The Malaysian government plans to gradually restart production activities when the number of cases drops below 4,000 per day. It still seems a long way off.
U.S. media recently reported: “The epidemic has caused factories in South and Southeast Asia to close, exacerbating the risk of disruption to the global supply chain. U.S. consumers may soon find local shelves There is nothing above.” Data from the U.S. Census Bureau shows that U.S. retailers have just enough inventory on hand to sustain sales for just over a month, near the lowest level since 1992.
Earlier reports stated that due to the global pandemic of the new crown epidemic in 2020, many Western importers have canceled contracts or delayed payments, resulting in the closure of many textile and clothing production plants in Bangladesh. Production has also dropped significantly. However, Vietnam has controlled the epidemic well, and commodity exports have risen instead of falling. In particular, textile and apparel exports reached US$29 billion, a year-on-year increase of 6.4%, surpassing Bangladesh and becoming the world’s second largest textile and apparel exporter. According to the General Bureau of Statistics of Vietnam, in the first seven months of this year, Vietnam exported textile and clothing products worth US$18.6 billion, a year-on-year increase of 14.1%.
As for the export and production of Vietnam’s textile and apparel in the second half of 2021, the chairman of the Vietnam Textile and Apparel Association said that in the face of the huge risk of the epidemic, some overseas orders have moved out of Vietnam and have returned to our country. the trend of. Sun Weiwei, a researcher at Everbright Securities, emphasized here that although the production capacity of garment manufacturing companies with production bases in Vietnam will be adversely affected, with some factories already shutting down or operating at low capacity, the recurrence of the epidemic in Vietnam may also prompt overseas orders to return to the country. Benefit the local textile and apparel industry.
However, the transfer of orders also brings huge risks. Since the outbreak of the new coronavirus abroad, there have been many foreign trade companies that have been affected and unable to accept orders and ship goods. Looking back on last year, the textile industry almost stagnated in the first half of the year due to the epidemic, and then gradually recovered as the epidemic improved. However, the repeated overseas epidemics this year caused the textile foreign trade market to receive flat orders. Until July, the epidemic further worsened, some areas implemented strict restrictive measures, and the order stagnation occurred again. It is currently the off-season for textiles, and the impact of the stagnation in order taking is relatively small. However, it is still unknown when orders can be resumed, and everything depends on the trend of the epidemic. If the overseas epidemic situation does not improve in September, the peak season in the second half of the year may not be available to foreign trade companies. This is what Boss Bu is most worried about right now.
Judging from the current epidemic situation, it will take some time for Southeast Asia to get rid of the predicament of the spread of the epidemic, and after getting rid of it, the economic recovery will take longer. The foreign trade market in the second half of the year will still face many difficulties. Even if the peak season comes, the market may not be as popular. </p
