AsemconnectVietnam - Vietnam’s textile and garment industry is facing with shortage of raw materials amid Covid -19 outbreak. The local suppliers of overseas fashion brands may have a bumpy road ahead as materials from China have been blocked due to COVID-19

Several fashion brands had to close their several outlets. For example, the new collection from Swedish fashion brand H&M is expected to be launched at only one store, at Vincom Centre Dong Khoi in Ho Chi Minh City, instead of all units across the country.
The shortage of goods from Vietnamese suppliers is being cited as the main reason behind new products not covering all outlets. H&M is now working with 30 suppliers and 40 tailor shops in Vietnam which account for 30 per cent of its total supplies globally. “However, we estimate COVID-19 will not cause any sizeable delays in the manufacturing process,” according to an H&M. He also said that running retail and production in the same market like they do in Vietnam has supported their operations at the current time. If H&M has to change its business plan, they will attach special importance to the major concerns of suppliers to figure out the best solutions.
H&M, as well as other fashion brands, have been in a deadlock because of shortcomings in material supplies from China. This has resulted in delays of several months for orders from local partners in Vietnam such as Garment 10 Corporation, Saigon 3 Garment JSC, and Viet Tien, among others.

Vietnam’s exports of textiles and garments fell in the first two months of 2020
According to the Vietnam Textile and Apparel Association (VITAS), about 60 per cent of local garment supplies originate from China. As a result, the epidemic has far-reaching implications on domestic textile makers.
The import-export turnover in garments and textiles saw a reduction in the first two months of 2020 due in part to the COVID-19 epidemic, with the export value at $4.5 billion, down 1.7 per cent, while the import value of cloth hit $1.6 billion, down 10.5 per cent on-year.
Last year, the bilateral trade value in the sector between Vietnam and China was $15.7 billion, $4.2 billion of which was export turnover and the remaining $11.5 billion was the import value.

According to analysis by the Ho Chi Minh City Association of Textile, Embroidery and Knitting, businesses are facing a lack of raw materials in April and May. The shortage mainly focuses on enterprises specializing in export production. For small- and medium-sized enterprises with a 50/50 ratio of export and domestic consumption, the raw materials for production depend heavily on large enterprises.
The lack of materials caused by the COVID-19 epidemic has caused and textile producers difficulties in delivering orders for international fashion brands like Gap and Nike in time with enough quantity. Even large-scale producers only have enough materials to maintain manufacturing into the next two months at best.
Nguyen Chi Trung, board chairman at Gia Dinh Group, a supplier of world-famous brands like Nike, Adidas, The North Face, Polo, and Vagabond, said, “COVID-19 has greatly affected Vietnamese businesses, especially footwear enterprises. Before the Lunar New Year, they imported enough raw materials to produce in the first quarter. However, the following months will be difficult.”

Other suppliers of fashion brands also expressed concerns about the lack of materials. A local supplier of Gap and Tommy Hilfiger, Garment 10 Corporation JSC – which imports 50 per cent of its materials from China – is struggling to complete orders due for delivery in March and April.
Furthermore, Saigon 3 Garment JSC, which specialises in supplying goods for UNIQLO and Nike, is reported to be able to only keep its workshops running through March.
Truong Van Cam, vice chairman of the VITAS, said that almost all members reserved enough materials to last until early April. Thus, after this time, if the epidemic is not controlled, enterprises may have to arrange an alternative timetable for staff or suspend their operation due to lacking materials.

Even though more than half of raw material factories in China have resumed production, Cam explained that it will take time for them to get back up to full speed. “Producers have been looking for alternative supply sources from India, Bangladesh, and Brazil to make up for the shortage of materials. However, it is sure that China could not be replaced as the main supplier by anyone else due to its much lower costs,” Cam said.

Vietnam’s textile and footwear businesses to find alternative raw material sources
While most textile and footwear enterprises in Vietnam struggled to find alternative sources of raw materials to maintain production, some with local sources have survived during the COVID-19 pandemic.
While most textile and footwear enterprises in Vietnam struggled to find alternative sources of raw materials to maintain production, some with local sources have survived during the COVID-19 pandemic.
Truong Van Cam, Vice Chairman and General Secretary of the Vietnam Textile and Apparel Association, said due to the heavy dependence on supplies from China, most of the firms lacked raw materials.

Cam said: “They are now either shifting to import raw materials from other countries or using domestic ones.”
However, he said: “The diversification of sources of imported raw materials takes time and is more expensive because of higher import prices, higher shipping and warehousing costs,” adding that: “Using domestic sources is a more feasible solution.”
According to Than Duc Viet, general director of May 10 garment firm, together with the largest supplier of China, his firm also used a variety of fabric sources from over 600 different suppliers in the world to make their shirts.
Though Viet felt the burden of loan interest and debt repayments as well as the risk of order cancellations from customers in such a difficult time, his firm with alternative raw materials can maintain production in the next few months.

For the longer period, Viet said: "Currently, we are considering using the local resources of fabric, but we must negotiate with partners to postpone or extend delivery time, as well as change the requirement of origin to be able to use those sources.”
According to Nguyen Van Thoi, Chairman of TNG Investment and Trading Joint Stock Company, as the majority of the firm’s orders was the free-on-board (FOB) which their customers prepared raw materials early, “we have sufficient input for production until the end of the first half of the year and are planning sources for the third quarter and the whole year now.”

Thoi added: “Compared to last year, our traditional customers have increased their orders in 2020. For example, Decathlon (France) increases their orders by 29 percent while Spormaster (Russia) increases by 73 percent.”
After the first two months, TNG achieved a total revenue of 559.5 billion VND (23.8 million USD), up 4 percent compared to the same period in 2019. In 2020, TNG expects revenue growth of about 10 percent to reach 4.9 trillion VND for the whole 2020.

With 70 percent of the materials from local sources, Nguyen Thanh Tung, director of Ha Tay Chemical Weave Company which produced vulcanized shoes, sports shoes and injection shoes to export to Europe, Japan and the Republic of Korea, said: “Most domestic suppliers can meet our production demand.”
With a maximum capacity of 120,000 pairs of shoes per month, Tung’s firm still ordered 30 percent of the materials from other countries. Now, he was negotiating with customers to ask them to change those outside sources to local ones.
CK
Source: VITIC/Vietnamplus.vn