Textiles and garments face many challenges in major import markets

The leap of the yarn industry

Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association (Vitas), said that in the first half of 2022, the export turnover of the textile industry is expected to reach about US$22 billion, up 23% over the same period last year.

This is considered very impressive growth in the context of many global challenges.

According to Mr. Giang, the premise for this impressive growth is the free trade agreements (FTAs) that Vietnam has joined. Accordingly, 15 FTAs ​​have created an open and comprehensive market corridor for the products of Vietnam's textile and garment industry. In particular, a number of FTAs ​​with binding rules of origin such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) have promoted the domestic textile industry to develop significantly in the past five years. Specifically, from a great dependence on imported fiber materials, Vietnam has been able to take the initiative in this source of raw materials. In 2021, Vietnam's yarn export has reached US$5.6 billion and is expected to reach about US$2.9-3 billion in the first six months of this year, thereby contributing to the total export turnover of the entire industry.

Mr. Giang said that the development of the yarn industry comes from the breakthrough in automation technology; many spinning factories have made great investments in automation technology and digital management. In particular, Vietnam's yarn industry has taken the lead in the development strategy of market diversification. Along with that, Vietnam's textile and garment industry is also developing rapidly following the trend of greening, switching to renewable energy, and saving water sources. Since then, it better meets the requirements of brands and is highly appreciated.

From a business perspective, Mr. Than Duc Viet, General Director of Garment 10 Corporation, also shared very positive information about exports in the first six months of the year. Accordingly, customers in the US, EU, and Japan markets recovered quickly and placed orders with an increase of 20-30% compared to the same period in 2021, even, some customers had an increased order volume; higher than before the Covid-19 pandemic. As a result, May 10's export revenue recorded an increase of over 30%.

Some other textile enterprises also announced positive business results in the first five months of the year. In particular, TNG Investment and Trading Joint Stock Company recorded net revenue and net profit of VND2.5 trillion (up 42% over the same period) and VND87 billion (up 58% over the same period), respectively. Thanh Cong Textile and Garment Trading Investment Joint Stock Company also recorded net revenue of US$77.4 million, up 15% and a net profit of US$4.4 million, up 6% over the same period.

Many challenges at the end of the year

Despite achieving impressive results in the first half of the year, Mr. Vu Duc Giang said that the export target of US$44-45 billion this year of Vietnam's textile and garment industry is still a big challenge, even if it is not feasible when inflationary pressure is increasing in major importing countries such as the US and EU. In addition, the conflict between Russia and Ukraine has caused input costs to increase, especially fuel costs, and transportation costs, thereby affecting the prices of Vietnamese textile and garment enterprises.

"Currently, the price of cotton is at a very high level while the price of yarn has not increased significantly, so the cost of the spinning industry has increased by 20-30%," said Mr. Giang.

In particular, the Uyghur Forced Labor Prevention Act (UFLPA) will affect orders that brands have signed with businesses. Brands will have to stop ordering fabrics from Xinjiang, because fabrics and yarns originating from Xinjiang will not be able to be traded into the Vietnamese market for export to the US. And in fact, there have been a number of Vietnamese enterprises whose orders have been stopped.

Mr. Than Duc Viet also said that the consumption of textiles and garments in the US and EU will decrease in the next few quarters due to the pressure of inflation. Meanwhile, the prolonged effects of the Covid-19 pandemic make logistics costs high; congestion and lack of containers have not completely stopped.

Although May 10 has signed orders until the end of the third quarter of 2022, some strong products such as shirts and high-end suits have had orders until the end of 2022, but Mr. Viet is worried that customers may adjust or cancel orders if inventory increases and sales volume decreases.

In the recently published textile and garment industry analysis report, SSI Research shared that domestic garment companies said that customers have shortened the time to pre-order three months in advance (except for public holidays).

From the perspective of the association, Mr. Vu Duc Giang recommends that enterprises should find their own supply chain and take advantage of the Vietnamese market. “The Vietnamese market may have a slightly higher price tag, but it has the advantage of stability and safety. When buying raw materials and accessories from Vietnam, businesses will also be proactive in production time and can actively negotiate with fabric manufacturers about the delivery time, quality and other requirements,” Mr. Giang said.

Vitas leaders said that currently, Vietnam's textile and garment industry has met about 40% of the demand for raw materials, in which, it is proactive in the supply of yarn. At the same time, the fabric lines have been diversified, especially knitted fabrics have taken the initiative by 50%, while woven fabrics and some other fabrics have also taken the initiative in 40-42%.

This is a positive breakthrough after years of investing in the supply shortfall. In the future, Vitas will continue to make efforts to promote the call for investment in the supply of the textile and garment industry.

Source: Customs News