Apparel / Textiles & Accessories

The State Council’s Joint Prevention and Control Mechanism recently held a press conference to introduce the situation regarding further strengthening of epidemic prevention and control.

The current round of the epidemic has now spread to 17 provinces, with 144 medium- and high-risk areas across the country, the most since normalized prevention and control.

Delta (Delta) variant virus is coming on fiercely, and the epidemic situation is urgent all over the world. According to Worldometers data, there are over 200 million confirmed cases of new coronary pneumonia worldwide. A total of more than 36 million diagnosed in the United States, nearly 31.77 million in India, and nearly 20 million in Brazil. In terms of deaths, the United States has killed more than 630,000, Brazil has died of nearly 560,000, India has died of more than 420,000, and Mexico has died of more than 240,000.

Data show that the United States, India, Iran, Turkey, and Russia are the five countries with the largest number of new confirmed cases. Indonesia, Russia, India, Iran, and the United States are the five countries with the largest number of new deaths.

With the rapid spread of the delta variant virus and the slow progress in vaccination, Southeast Asia has now become one of the "hardest-hit areas" of the global new crown. In the past week, the number of confirmed cases in Southeast Asia has increased by 41%, with more than 500,000 new cases and a 39% increase in deaths, making it the region with the fastest increase in deaths in the world.

The rapid spread of Delta mutant strain threatens crude oil demand, and oil prices plummeted

On the first working day of August, international oil prices fell sharply and stopped the "three consecutive positives". The WTI September contract had the deepest intraday drop of 4.6%, and finally closed at $71.49 per barrel; Brent crude oil futures fell the deepest by 4.1%, as low as 72.32 on the day. The US dollar fell below the three barriers of US$73, US$74, and US$75, the biggest drop in the past two weeks.

As the king of commodities, the fluctuation of crude oil prices is bound to affect the price trend of chemical products. The deep drop in international crude oil prices also dragged down downstream chemical commodity prices. On August 4, the domestic futures market was in early trading, and crude oil futures fell the most. As of 9 am of the same day, the main contracts of fuel oil and LU futures have fallen by more than 2%, and the main contracts of 13 varieties of LPG, crude oil, staple fiber, rapeseed meal, and soybeans have fallen by more than 1%. The chemical market has also seen a decline, and some products have continued to show a decline in market prices for many days, and prices have fallen.

This week's PTA main contract fell back and closed after a record high in intraday prices on Monday. The price continued the previous day's decline this Tuesday, with a decrease of 3.42%.

In the same way, with the epidemic suppressing the market, many companies are worried that the rising market prices of raw materials, especially spandex, are also very risky for later collapse. Therefore, manufacturers tend to be more cautious about the purchase of raw materials in the future, and their willingness to buy is not strong. Under the influence of repeated epidemics, the terminal market mentality is under pressure, and the intention of subsequent orders is uncertain. Polyester products such as polyester filament may experience another wave of correction.

Closure of factories: Vietnam and other Southeast Asian regions are "occupied" again

So far, the cumulative number of confirmed cases in Southeast Asia has surpassed that of Latin America and India, which had previously been severely affected. In particular, since the large-scale diagnosis in Vietnam caused in April this year, nearly 140,000 people have been diagnosed. Among them, Ho Chi Minh City and its surrounding provinces and cities in the south are the hardest-hit areas. For example, Binh Duong Province, an industrial town, has been affected by the latest wave of epidemics. There are tens of thousands of people infected with the epidemic. In addition, Vietnam's production capacity is being severely affected by the epidemic. The shoe industry leader Baocheng, the textile factory Ruhong was affected by the suspension of work, the Saigon High-tech Park also reported the closure, some Samsung Electronics factories suspended operations, and many organizations issued reports warning that if emerging markets cannot be controlled in the next few months The epidemic threatens the recovery of the local economy and exacerbates the challenges of the global supply chain.

1. The Nike Vietnam factory shut down

According to an industry source, every Nike factory in Vietnam has stopped work and delayed shipments are serious. If there is a way to maintain the quarantine measures, stop and stop, and production is not smooth; the mainland production lines are also short of jobs, with an average salary of 1,000. In dollars, the original drawdown was temporarily unable to find workers. In addition, the raw materials and shipping costs have increased by three times during this period. "Although the current cost has not been reflected in the retail end, there have been US brands that have always said that they will increase the price. Can't hold it down." However, there is no clear announcement of the time and amount of price increase for brand shoe manufacturers.

Analysts pointed out that after the implementation of the measures to extend the downtime, in terms of production capacity, Vietnam is one of the main production locations of Baocheng's footwear business, accounting for about 45% of Baocheng Group's shoe production capacity, and Fengtai's position in Vietnam The production capacity also accounts for about 50%. The extension of the factory shutdown in Vietnam has had a significant impact on the short-term operations of the two major shoe manufacturers. At present, the industry plans to work overtime after the shutdown is lifted to increase output in response to customer orders.

However, it is estimated that even if the closure and resumption of work in the future are released, the production capacity will not rise too quickly, and the shoe industry will not achieve a return increase in one time. It is expected that full capacity production can be resumed between the end of the third quarter and the fourth quarter.

2. The leading Vietnamese factory in domestic cotton yarns has restricted the movement of people due to the epidemic

Coincidentally, Blum Oriental Co., Ltd. issued an announcement on the evening of August 2 that affected by the epidemic, Vietnam began to implement the second round of 14-day social distancing measures from 0:00 on August 2nd. As a result, Blum Oriental's wholly-owned subsidiary Blum (Vietnam) Co., Ltd., located in Tay Ninh Province, Vietnam, has implemented the second round of the "three-site" policy from 0:00 on August 2. Eat on the spot and rest on the spot. Due to the restrictions on the movement of people in the place of residence of some Vietnamese employees, they cannot be on duty within the above 14 days, which will affect the existing production capacity of Vietnam Blum. As of now, Blum Vietnam has a production capacity of 1 million spindles, accounting for approximately 60% of Blum Oriental’s total production capacity. According to Blum Oriental’s preliminary calculations, during the implementation of this round of Vietnam’s epidemic prevention and control measures, Blum’s production capacity in Vietnam will be reduced to 32 %about. It is estimated that for every 14 days affected by Vietnam Blum, the company's annual output will drop by 2%.

Continue to blockade, 70,000 companies closed down

On August 2, according to a report from "Vietnam Economy":

Vietnam’s fourth wave of COVID-19 mutant strains is coming so fiercely that a number of industrial parks and factories have been temporarily closed, production and supply chains in various regions have been interrupted due to the implementation of social distancing, and the growth rate of industrial production in Vietnam has slowed down.

The 19 southern provinces and municipalities directly under the Central Government implemented social distancing in accordance with the government's instructions. Industrial production fell sharply in July, of which the industrial production index of Ho Chi Minh City fell by 19.4%.

According to the Ministry of Investment and Planning of Vietnam, in the first half of this year, a total of 70,209 companies in Vietnam closed down, an increase of 24.9% over last year. This is equivalent to 400 companies closing down every day.

It is reported that major production bases of global brands from Toyota to Nike in Vietnam were forced to suspend work due to the blockade; electronics companies including Samsung and Foxconn are also facing production difficulties due to the blockade.

In addition, as the world's second largest exporter of textiles and garments, about one-third of Vietnam's textile and garment factories have been closed due to the epidemic. According to data from the Vietnam Textile and Apparel Association (Vitas), between 30% and 35% of garment factories in the country have closed down, among which Nike is one of the big brands.

After the most challenging year in history in peacetime, the global supply chain is likely to face even greater destruction.

Due to the impact of the epidemic, Vietnam's foundries are close to "zero output", and local factories have stopped production, causing a "supply cut" crisis.

Coupled with the high import demand of American importers and consumers for Asian products, especially Chinese products, the situation of port congestion, delivery delays, and space shortages becoming more and more serious has not improved. The current products of US retailers Inventory can only be maintained for about a month, setting a record for the lowest inventory in 30 years (since 1992).

"The epidemic has caused factories in South and Southeast Asia to stop production, increasing the risk of global supply chain disruption. American consumers may soon find that local shelves are empty." US media recently warned of the epidemic to American consumers. Dilemma and impact.

According to a report from Vietnam Express, taking Nike shoes as an example, under the impact of the fourth round of the epidemic, Nike's foundry factories in Vietnam may face a "zero output" crisis. There are about 200 contract manufacturers in Vietnam, and the two largest contract OEMs, Baocheng Group and Chang Shin, have all shut down.

Baocheng Footwear, which has a factory in Ho Chi Minh City alone, employs about 62,000 Vietnamese workers. Nike shoes such as "coconut shoes" and sneakers, which are popular among young people, are produced in this factory. In addition, the report also wrote that in the financial report released in June this year, in the past fiscal year, Nike shoes produced in Vietnam accounted for 82% of the US consumer market. The suspension of the Vietnamese factory is alleged to be the main reason for the supply of Nike shoes in the United States.

Southeast Asia is facing a major test of the epidemic: the recurrence of the epidemic in Vietnam may prompt overseas orders to return to the country

The Secretary-General of the World Health Organization Tan Desai recently stated that in the four weeks of July, the number of confirmed cases around the world increased by 80%.

Southeast Asia, which is ravaged by the delta variant virus, is currently the most severely hit by the epidemic. The industrial output of seven Southeast Asian countries has shrunk the most since May last year, with Indonesia and Malaysia the worst.

Indonesia is now in a semi-blocked state, and its 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 the people's livelihood, the city will not be completely shut down, and he pointed out that the blockade may not be able to solve the crisis.

Malaysia reported 17,786 new confirmed cases on July 31, 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 4000 per day. It still seems to be nowhere in sight.

US media recently reported that: "The epidemic has caused factories in South and Southeast Asia to close, increasing the risk of disruption in the global supply chain. American consumers may soon find that local shelves are empty." Data from the U.S. Census Bureau shows that US retailers have only enough inventory on hand to maintain sales for more than a month, which is close to the lowest level since 1992.

Earlier reports said that in 2020, the new crown epidemic is pandemic globally, and many Western importers have cancelled contracts or delayed payments, leading to the closure of many textile and clothing factories in Bangladesh and a sharp drop in output. However, the epidemic in Vietnam is well controlled, and commodity exports have risen instead of falling.

In particular, textile and apparel exports reached 29 billion U.S. dollars, a year-on-year increase of 6.4%, surpassing Bangladesh to become the world's second largest exporter of textiles and apparel. In the first six months of this year, Vietnam's foreign merchandise trade continued to grow. The export value of the textile and apparel industry reached US$19.18 billion, a year-on-year increase of 21%.

Regarding 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 stated that in the face of the huge risk of the epidemic, some overseas orders will move out of Vietnam and return to my country. 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, and some factories have been suspended or low-capacity operations, the recurrence of the Vietnam epidemic may also promote overseas orders to return to the country. Favor the local textile and garment industry.