Both major shoe manufacturers, Baocheng Industrial (9904) and Fengtai (9910), have recently issued announcements about further extensions of factory shutdowns in Vietnam, most often until August 15th.
Not only Baocheng and Fengtai, but also Longdian and Hongfu shoe factories, which mainly have production bases in Vietnam, have recently been forced to sell shoes due to their inability to implement the “three locals” policy implemented by the government. All are facing work stoppages. Industry insiders revealed, “Transportation costs, raw materials have increased, and production is not going smoothly. Although it has not yet been reflected in retail prices, American brands have been saying that they will increase prices, and they probably can’t hold it back. !
The shoe industry giants cannot cooperate with the government’s “three local policies”
Vietnam has After a large-scale diagnosis in March, nearly 140,000 people have been diagnosed so far. Ho Chi Minh City in the south and its surrounding provinces and cities are the hardest-hit areas. Take Binh Duong Province, an industrial city, where tens of thousands of people have been infected in the latest wave of the epidemic. .
It is understood that Vietnam only started vaccinating in June this year, starting with factories in industrial areas with a large number of people. In June, most people in large Taiwan-funded factories were vaccinated with AZ. The factory is relatively safe, but the infection outside is very dangerous.
However, there are reports of major Taiwan-funded factories suspending operations, mostly because they cannot cooperate with the government’s “three locals” (eat locally, produce locally, and live locally) policy. Only factories that can truly achieve “three things on the spot” can operate.
Lai Qijian, secretary-general of the Taiwan Shoemaking Industry Association, said that except for factories infected with the epidemic that need to be temporarily suspended for disinfection, other factories that meet the “three local requirements” can continue to operate. “But most factories can’t do it. Most of the factories are production lines, passing people one by one, and it’s difficult to maintain social distance.
Vietnam is different from China. Vietnam pays attention to family life, and after work They all go home, so most factories don’t have dormitories, and it’s difficult to live on-site.”
Nike Vietnam factory has all lines Work is suspended, shipping costs have tripled, and price increases may be unavoidable
An industry source revealed that every Nike factory in Vietnam has stopped working, and shipment delays are serious. There are ways to maintain it. The quarantine measures are also stop-and-go, and production is not going smoothly; Mainland production lines are also short of workers, with average wages reaching 1,000 U.S. dollars. Workers who were originally downsizing cannot be found temporarily. In addition, raw materials and freight have increased by 3 during this period. Times, “Although the costs have not yet been reflected in the retail side, some American brands have been saying that they will raise prices, and they may not be able to hold back.” However, there is no clear announcement of the time and amount of price increases for brand shoe manufacturers.
Analysts pointed out that after the implementation of the extended shutdown time, in terms of production capacity, Vietnam is one of the main production capacity layout locations of Baocheng’s shoemaking business, accounting for The group’s shoemaking production capacity is about 45%, and Fengtai’s production capacity in Vietnam also accounts for about 50%. The extended shutdown of factories in Vietnam has a significant impact on the short-term operations of the two major shoe manufacturers. Currently, the companies plan to increase output by working overtime after the shutdown is lifted to meet customer order demand.
However, it is estimated that even if the lockdown is lifted and work resumes in the future, the recovery rate of production capacity will not be too fast. The revenue recovery of shoe manufacturers will not be achieved all at once. It is expected to reach the end of the third quarter. Production at full capacity is expected to resume in the fourth quarter. </p
