Apparel / Textiles & Accessories

Vietnam is ushering in the most serious wave of the new crown epidemic a few days ago, with more than 10,000 new confirmed cases in a single day for multiple consecutive days. As of 14:00 on the 23rd, Vietnam had a total of 348,000 confirmed cases and 8,277 deaths. Ho Chi Minh City, the country's largest city and economic and trade center, has become a "severe disaster area". The city has more than 170,000 confirmed cases, accounting for half of the country's confirmed cases. The cumulative number of deaths is 6,071, accounting for 73% of the country's deaths. The epidemic situation is extremely severe.

It is reported that from 0:00 on the 23rd, Ho Chi Minh City has implemented the most stringent "in situ" prevention and control quarantine measures since the outbreak. From August 23 to September 6, "Martial Law" will be implemented throughout the city, except for those permitted by regulations. Outside the 31 special groups, all citizens are not allowed to go out. The distribution of food for nearly 10 million people in the city will all be taken over by the army, police, and government epidemic prevention and control teams.

Previously, 19 cities including Ho Chi Minh City were "blocked", which has already caused serious damage to Vietnam's economic production and supply chain. This upgraded version of prevention and control measures is expected to have a more serious impact on factory production and cargo transportation.

A large number of factory shutdowns

SEKO Logistics stated that less than 30% of factories in Vietnam maintain a complete production plan.

According to the Vietnam Textile and Apparel Association, nearly 90% of the industry's supply chain has been severely affected by the blockade, and as many as 80% of garment and textile companies in the southern provinces have completely stopped production. In the north, about 20% to 30% of textile and clothing suppliers have stopped production. The Korean Chamber of Commerce in Ho Chi Minh City estimates that 27% of its member companies have stopped production.

The Vietnam Seafood Exporters and Producers Association stated that only 30% of seafood companies in the southern region are still operating. In addition, in recent years, due to the increasing tariffs imposed by the United States on Chinese products, China's labor costs have continued to rise, and many American manufacturers have also been affected by the epidemic.

According to reports, on Friday, 90 CEOs of major American brands such as Adidas, Coach, Gap, Hanesbrands, Nike, VF and Under Armour signed a joint letter to petition US President Joe Biden Accelerate vaccine assistance to Vietnam. They believe that the rapid restoration of Vietnamese industry will minimize supply chain problems for apparel companies that employ 3 million employees in the United States.

Vietnam's textile industry will encounter "turmoil"

According to the "Vietnam Net" report, the loss of workers, the loss of orders, and the loss of capital are the three major crises facing the southern manufacturing industry. The unstable epidemic situation has also made many international investors take a wait-and-see attitude towards Vietnam's business.

According to data from the Vietnam Textile Association (Vitas), Vietnam's textile exports in the first seven months of this year reached nearly 23 billion U.S. dollars, an increase of more than 50% year-on-year, surpassing Bangladesh, ranking second only to China and ranking second in the world. However, since July, complicated epidemics in southern provinces and cities have spread, affecting the production and operation of enterprises.

In addition to worrying that the epidemic will affect the supply chain, rising logistics costs, severe shortage of containers, and congestion of many seaport export goods are all obstacles that directly affect the production of textile enterprises.

Logistics costs, which currently account for approximately 9% of the cost of textile products in Vietnam, are rising sharply. According to VnDirect, container leasing prices have tripled in the first six months of this year. At the same time, the shortage of containers affects the business of ODM and OBM orders and slows down the delivery progress of partners.

In addition, rising freight rates will also put downward pressure on purchase prices. Most textile processing companies use FOB for export, and the delivery of goods is only slightly indirectly affected. However, if the delivery time cannot be guaranteed, it will affect the delivery commitments with partners and customers. In this case, there is no other way than to renegotiate the delivery time with the partner.

Another difficulty in the textile industry in the second half of the year is labor shortage. Vitas predicts that if the new crown epidemic cannot be controlled by the end of August, the number of workers is expected to only reach 60-65%. Vitas Chairman Wu Dejiang said: The shortage of labor resources will be very serious for some time to come.

At present, many textile and garment enterprises are considering choosing raw materials from south to north to avoid production interruption. But even in this case, Mr. Jiang said that when companies bear the additional transportation costs, they are not too optimistic, and it is difficult to guarantee the delivery time for various brand companies.

Chairman Vitas said that under the current urgent situation, speeding up the vaccination of many workers including the production areas of textile companies in industrial parks and industrial parks is a fundamental issue.

Facing many challenges, the textile industry still has opportunities to win the market from competitors. According to the VnDirect report, many countries considered to be "direct competitors" in Vietnam's textile and garment industry, such as India and Myanmar, have also been affected by the new crown epidemic, making garment factories currently only have 50% production capacity.