Vietnam Textile Industry Will Encounter "Storm" In The Second Half Of This Year

According to the data of Vietnam Textile Association (vitas), in the first seven months of this year, Vietnam's textile exports reached nearly 23 billion US dollars, a year-on-year increase of more than 50%, surpassing Bangladesh, ranking second only to China and ranking second in the world.

However, since July, the complex epidemic situation in southern provinces and cities has begun to spread, affecting the production and operation of enterprises.

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

At present, the logistics cost, which accounts for about 9% of the cost of Vietnam's textile products, is rising sharply. According to vndirect, container rental prices tripled in the first six months of this year. At the same time, container shortage affects the business of ODM and OBM orders and slows down the delivery progress of partners.

In addition, rising freight rates will also exert downward pressure on purchasing prices. Textile processing enterprises mostly use fob for export, and the delivery of goods is only affected indirectly. However, if the delivery time cannot be guaranteed, the delivery commitment with partners and customers will be affected. In this case, there is no alternative but 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 outbreak is brought under control by the end of August, the number of workers is expected to reach only 60-65%. Wu Dejiang, chairman of Vitas, said: the shortage of labor resources will be very serious for some time to come.

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

President Vitas said that under the current urgent situation, it is a fundamental problem to speed up the vaccination of a large number of workers, including in the industrial areas and the production areas of textile enterprises in industrial parks.

Facing many challenges, the textile industry still has the opportunity to win the market from competitors. According to vndirect report, many countries, such as India and Myanmar, which are considered as "direct competitors" of Vietnam's textile and garment industry, are also affected by the new crown epidemic, making garment factories only have 50% of their production capacity at present.