The re-emergence of the Covid-19 pandemic with extremely complicated developments has brought many impacts to businesses large and small. In particular, textile enterprises, especially those manufacturing outsourcing, have been facing many "risks".
The Board of Directors of Southern Textile and Garment Corporation - Vinatex (VSC) organizes weekly market meetings to monitor the situation of the main markets, timely grasp the latest news related to the textile market. at home and abroad, update the situation of raw materials - auxiliary materials, global logistics situation as well as the report on production situation of VSC last week in order to propose suitable treatment options.
Leaders of Southern Textile and Garment Corporation - Vinatex hold weekly market meetings
Let's take a look at the remarkable highlights of the current situation of raw materials - accessories and global supply chain. This is one of the factors that have a strong impact on textile enterprises in general and the Southern Textile and Garment Corporation - Vinatex in particular.
The situation of raw materials - accessories for the textile industry
Most of the small and medium-sized textile enterprises are "headaches" to solve the problem of raw materials - accessories in the context of "hundreds of surface" difficulties because of the Covid-19 pandemic. Most of the raw materials and accessories for Vietnam's textile and garment industry are imported from abroad. Currently, Vietnam's textile and garment industry depends on about 65% - 70% of raw materials and accessories imported from China and some other countries such as India, Korea, Malaysia, Thailand, ... Meanwhile, the epidemic situation is becoming more and more tense in Asian countries today, forcing them to close and suspend production activities to implement safe anti-epidemic measures.
This leads to the source of raw materials - auxiliary materials for textile and garment enterprises that have been facing the risk of serious "shortage" in the near future. According to Vitas - Vietnam Textile and Apparel Association, the interruption of imported raw materials and accessories has affected about 30% - 40% of production capacity depending on each enterprise.
Vietnam's textile and garment raw materials and accessories are at risk of shortage due to the pandemic's impact
(Source: thumuavaitonkho.com)
Not only is it difficult to import raw materials and auxiliary materials for production, but the price of cotton, fiber and yarn is also constantly fluctuating, affecting the price of input materials and raw materials. Specifically:
- Up to now, the average cotton price tends to increase slightly, the cotton price on August 27, 2021 reached more than 96.3 cents/lb or about 2.32 usd/kg. The main cause is American and Indian cotton crop failure, along with natural disasters and epidemics, applying a policy of not using products originating from Xinjiang (China).
- The price of fiber still fluctuates according to the market but in general still tends to increase strongly, compared to the end of 2020 it has increased by over 25%. The main reason is the increase in world raw materials (gasoline, oil, iron, steel, cotton...) leading to an increase in input costs and an increase in the price of polyester fibers. For blended yarns, prices vary depending on the market and time.
Cotton yarn prices tend to increase in the near future
(Source: vietnambiz.vn)
With the latest developments in input raw materials, production costs increase. Prices of fabrics and raw materials - auxiliary materials are forecasted to increase accordingly. Therefore, it is forecasted that Q4 orders will have a relatively low value, production units must balance production appropriately and increase productivity to compensate for the loss caused by the tight supply market in terms of prices in the coming quarter. while still ensuring quality and delivery.
The global supply chain is in danger of breaking
Along with the events in the maritime industry, the complicated developments of the Covid-19 epidemic have had a strong impact, pushing the global supply chain to the risk of breakage. Besides, the recent flood disaster in China and countries in the European region is also one of the reasons why the current global logistics situation, which is already tense, is even more serious. A series of problems such as shortage of empty containers, fluctuations in freight rates, temporary supply chain disruptions, etc., have created "barriers" for the development of the economy in general and the sector. logistics in Vietnam in particular.
Currently, the shortage of empty containers, high freight rates, port congestion, the number of waiting ships, and late ships all appear in major ports around the world. Congestion of container ships outside the two ports of Los Angeles - Long Beach (USA) has not improved much, while ports from China to Germany have to face a new Covid-19 outbreak and a number of other restrictions, making the flow global trade flows are disrupted.
Statistics of ships anchoring congestion at 2 ports of Los Angeles and Long Beach
(Source: Vietnambiz.vn)
In fact, according to Vessels Value, about 400 container ships with a capacity of 2.4 million 20-foot containers are unable to move at ports around the world. Data from Clarksons Platou Securities also shows that congestion is worse when the number of ships "standing still" accounts for 4.6% of the global container fleet.
In Vietnam, the operations of ports and ICDs (Inland Container Depot) in the South are also seriously affected. Tan Cang Hiep Phuoc is temporarily closed from August 26, and is expected to reopen until mid-September 2021. The new port of Thot Not (Can Tho) has not yet reopened. Currently, only Cat Lai and Nhon Trach ports are operating in the South with relatively low productivity. In addition, currently some ports give priority to export goods, so imported goods are very difficult to take out, leading to a large amount of inventory at ports.
The global supply chain is threatened with "broken" if it is not promptly improved
(Source: smpgroup.vn)
What direction for Vietnam Textile and Garment Corporation - Vinatex?
Facing the heavy impacts of the Covid-19 pandemic, textile and garment enterprises have to find their own direction. Many businesses have to suspend operations, even close factories. However, many businesses are trying to "struggle" to overcome this difficult period to bring everything back to the "new normal". Southern Textile Corporation - Vinatex is also one of them!
In fact, although the current situation is very difficult, it is undeniable that many textile and garment enterprises have had enough orders until the end of the year. However, it is worrying that the current market is facing many risks and uncertain factors. Failure to maintain production and delivery on time will result in a fine, cancellation of orders due to failure to complete the signed contract, and damage to the factory that can amount to hundreds of thousands of products. billion USD. In addition, with the current situation where the factory is constantly suspending production, the orders in the fourth quarter are likely to move to other regions and countries, causing a shortage of goods in the future.
Therefore, under the direction of the Chairman and the Board of Directors - Vinatex Textile and Garment Corporation: The epidemic situation is expected to last for the next few years, we need to prepare the mentality of "living and producing". safely and effectively with the epidemic” right now. By all means to bring the factory back to production, the factory's Board of Directors needs to plan and prepare carefully before returning to both ensure production safety for workers and revive. factory in the shortest time.
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