Apparel / Textiles & Accessories

The epidemic in Vietnam has further spread, with nearly 10,000 newly confirmed cases in a single day, and 19 cities continue to be blocked; industrial production has been blocked and a large number of factories closed; port congestion is serious and storage yards are nearly saturated, Cat Lai and Newport, Vietnam Geme International Port Terminal (TCIT) notified it to suspend the acceptance of import and export containers.

In the first half of the year, textile and apparel exports increased by 20%+

Overseas Network, August 6th. According to the information released by the Ministry of Health of Vietnam on the 5th, Vietnam has newly confirmed 7244 cases of new coronary pneumonia, including 7239 local cases and 5 imported cases.

According to the "Vietnam Youth Daily" report, Vietnam has a total of 1,85057 confirmed cases of new coronary pneumonia, and a total of 2,720 deaths. Ho Chi Minh City, the "epicenter" of the southern epidemic, has newly confirmed 3886 cases, with a total of 109,916 confirmed cases. In addition, Binh Duong Province reported 882 cases, Long An Province 715 cases, Dong Nai Province 358 cases, Tay Ninh Province 235 cases, Tien Giang Province 169 cases, Dong Thap Province 114 cases, and Ba Ria Vung Tau Province 112 cases.

Although Vietnam’s textile and apparel exports totaled nearly US$19 billion in the first six months of 2021, a year-on-year increase of more than 20%, indicating the industry’s earlier recovery momentum, there are still many problems that need to be resolved in terms of sales and exports. In addition to the positive signals released by the market, the complex situation of the COVID-19 epidemic requires companies to adopt supporting anti-epidemic measures and stabilize production, and increase export efforts at any time in the future.

Orders from India, Bangladesh, Myanmar and Cambodia are transferred to Vietnam

Nearly a year after the COVID-19 epidemic caused supply interruptions, customer cancellations or extended delivery times, Vietnamese textile and apparel companies have gradually overcome difficulties, with more and more orders, greatly improved economic results, and workers’ income and employment. The opportunity is guaranteed. When evaluating the operating performance of No. 10 Garment Corporation, the company’s vice president Bai Shenglong stated that the company’s total revenue reached 1.433 trillion VND in the first half of this year, a year-on-year increase of 20%, and its after-tax profit was 33.8 billion VND. A year-on-year increase of 2.8%, which depends on the company to reduce costs. Due to the deadlock of competitors such as Myanmar and Cambodia, Vietnam received a lot of orders during this period, and the export value increased, which helped the company to achieve higher operating efficiency.

Liu Jinzhong, president of Beijiang Clothing Company, agreed. He said that the market has improved in the first half of this year and the order volume has risen, which will help the company stabilize production and complete the set goals. However, if the epidemic cannot be controlled as soon as possible, the company's revenue and production efficiency will suffer.

Enterprises that process textiles and garments according to their partners' orders will be fined and lose processing fees. If the partner refuses to accept the goods due to slow delivery, the enterprises that adopt the FOB production method (purchasing raw materials, producing, and selling finished products) will suffer greater losses.

Li Jinchang, chairman of the Vietnam Textile and Apparel Group (Vinatex), stated that Vietnam's textile and apparel exports reached nearly US$19 billion in the first half of this year, an increase of 20% year-on-year, which exceeded the level at which the epidemic had not yet occurred. This shows the market's early recovery momentum. It is expected that it will not return to 2019 levels until the end of this year, or even the third quarter of 2022. In addition to demand factors, this recovery also comes from supply chain shifts.

Specifically, the new crown pneumonia epidemic has spread widely in major textile and apparel exporting countries such as India, Bangladesh, and Cambodia, causing companies to be unable to operate. As of April this year, Vietnam has done a good job of epidemic control, so companies can maximize production speed. Although the price of the clothing industry is low, the order volume is still sufficient. In addition, another bright spot also comes from the yarn industry. After 24 consecutive months of difficulties, low demand, and sometimes even the selling price is lower than the cost price, the industry has improved since October 2020, and both the demand and the selling price have soared. The effects achieved in the first half of this year can make up for the losses suffered in 2019 and 2020, and the yarn industry has become an industry with a contribution rate of more than 60% to the group. As a result, the group's total revenue is equivalent to the same period, and the profit has completed more than 70% of the annual plan, a year-on-year increase of 190%, which is 140% of 2019.

Vaccination in the second half of the year is the key

Vinatex Chairman Li Jinchang said that in addition to the results achieved, companies are currently facing new risks brought about by the COVID-19 epidemic, such as the emergence of new coronary pneumonia cases in clothing manufacturers. Many powerful companies of the group located in the southern region are facing the risk of working in isolation mode, and the labor force participation rate is low (as of July 10, a total of 10,000 workers cannot work in the factory), superior products The textile and apparel industry has not yet recovered, and the market opportunities facing the textile and apparel industry are good, but if progress cannot be guaranteed due to the epidemic, the economic benefits achieved will decline. Therefore, in order to proactively produce and strengthen exports, companies are required to strictly implement epidemic prevention measures, and at the same time increase supply capacity when the market improves due to the short-term transfer of investment to Vietnam. Reasonably use the production capacity of product regions where the market has not yet recovered, and maintain human resources and minimum fixed costs.

Vitas Chairman Wu Dejiang said that in addition to actively preparing domestic raw materials for production and aiming to tap the opportunities brought by the new generation of free trade agreements, all companies should strengthen investment in the development of production chains, and research and develop markets to increase products. Export efforts, and strive to achieve the goal of 39 billion U.S. dollars in exports. In addition, it is hoped that the government will control the epidemic as soon as possible and vaccinate workers, aiming to help enterprises stabilize production and export activities.

Ruan Xuanyang, chairman of Xing'an Garment Corporation, said that the market has improved in the first few months of this year. The company has successively obtained orders from the United States and the European Union, but its production and operation effects still depend on the epidemic situation. If the epidemic is brought under control as soon as possible and orders are abundant, the original strength will become a good foundation for the company to strengthen production and expand the market.

In addition to the efforts of enterprises, various textile and apparel companies in Vietnam hope that the country will prepare enough new crown vaccines to vaccinate workers in advance to avoid the spread of the epidemic in the community. In this way, it provides convenient conditions for enterprises to invest with confidence and stabilize production. At the same time, specific support policies are introduced to promote the development of textile and garment auxiliary industries, and the construction of centralized textile and garment industrial parks are aimed at laying the foundation for enterprise development.