Last year experienced the greatest glory in the history of container shipping. Freight rates soared and shipping companies made a lot of money. Compared with previous years, the export sea freight rate this year is hugely different. This year it has dropped from the beginning of the year to the middle of the year. Whether it is Southeast Asia, the Middle East, Europe, or the Americas, global sea freight prices are falling rapidly.
Taking Southeast Asia as an example, freight rates on Southeast Asian routes have plummeted recently, nearly halving. The freight rates to some ports in Southeast Asia have risen from around US$300 to a high of 2000-3000, and now they have dropped to around US$300.
Global inflation has led to a decline in consumer purchasing power, a serious lack of freight demand, a surplus of space on the Thailand-Vietnam route, and freight rates continue to fall. The worse the market conditions are, the more serious the involution will be, and there will be rush for goods and price-cutting competition in the market. The plummeting shipping rates in Southeast Asia have also caused major problems in textile orders in the Vietnamese market.
Vietnam factory orders reduced by 50%,
A large number of workers return home, and the bustling apartments are empty
On August 27, according to Vietnamese media reports: “We spent a lot of energy and money recruiting workers, but now we have to accept their departure,” Mr. Shipp said. With factories unable to sign new orders and production not expected to resume until the middle of next year, workers are impatient. As the Binh Duong Federation of Labor pointed out, from the second quarter to now, more than 330 manufacturing companies in the region have faced difficulties and had to lay off employees, suspend contracts, and give workers unpaid leave. The total number of employees affected exceeds 41,000. In addition, many factories also allow workers to take annual leave, reduce the number of working days in a week, temporarily stop working but still pay basic wages…
Mr. Dang Tan Dat, deputy director of the Legal Policy Department (Binh Duong Federation of Labor), said that various industries such as wood, textiles, footwear, and electronics exporting to European and American markets are facing many problems and difficulties. The common situation in factories is that orders have been reduced by 30-50%, new orders cannot be signed, finished products cannot be exported, and funds are slowly withdrawn… For workers, when their jobs are reduced, many people choose to repatriate to reduce expenses because “4- The basic salary of 5 million dong is difficult to maintain.”
A large influx of foreign capital
However, there are still major “bottlenecks” in the raw material supply chain
At the same time, Vietnam’s “Investment News” reported on August 25 that although orders are currently facing difficulties, Vietnam’s textile industry still has a lot of room for development, and the demand for foreign investment is huge. At the same time, it further illustrates that there are still “bottlenecks” in the supply chain. “.
According to statistics from the Foreign Investment Bureau of the Ministry of Planning and Investment of Vietnam, as of May 18, 2022, there are 2,787 effective foreign direct investment projects in Vietnam’s textile industry, with a total registered capital of US$31.3 billion. The massive influx of foreign capital has rapidly increased the production capacity and export scale of Vietnam’s textile industry. In 2018, Vietnam’s total textile and clothing exports exceeded US$36 billion; in 2021, it will be US$40.3 billion, of which foreign direct investment accounted for more than 60% of total exports.
Although Vietnam’s textile industry continues to expand and has become an important link in the global supply chain, there are still “bottlenecks”: uneven production of fabrics, yarns and accessories.
Nguyen Anh Tuan, deputy director of the Foreign Investment Bureau of the Ministry of Planning and Investment, said that Vietnam’s textile industry lacks connectivity in the value chain. Vietnam has a large trade surplus in yarn and clothing, but also a large trade deficit in fabrics. The yarn produced is mainly for export, while domestic fabrics only meet nearly 50% of demand, causing Vietnam to import more than 10 billion US dollars in various fabrics every year. The shortage of fabrics is a potential market that attracts foreign investment in Vietnam’s fabric and yarn production.
Data from the General Administration of Customs of Vietnam show that in 2021, Vietnam’s textile raw material imports reached US$14.3 billion, an increase of 20.6% from 2020, accounting for 60.0% of the total imports of raw and auxiliary materials in the textile and apparel industry. Among them, imports from China, South Korea, Taiwan, Thailand and other markets have increased sharply. Although Vietnam’s textile and apparel exports exceed US$40 billion, Vietnam cannot produce its own raw materials, including cotton, yarn and fabrics. The import volume of textile raw materials in 2021 reached US$23.86 billion, an increase of 21.3% over 2020.
The United States, the European Union, South Korea and China are Vietnam’s four major export markets, with the average annual import of textiles, clothing and yarn from Vietnam reaching US$24 billion (2021). However, the above-mentioned markets are implementing many new regulations on imported clothing, such as requiring products to be green, chemical-free and recyclable. Therefore, if investment funds are not directed in this direction, it will be difficult for Vietnam’s textile and apparel exports to maintain its top three position.
Vietnam’s textile and clothing exports encounter “stumbling blocks”
Lower half��Industry expectations are pessimistic
According to data, in July 2022, Vietnam’s textile and clothing exports slowed down significantly from the previous month, and yarn imports and exports continued to decline. Textile and clothing exports were US$3.683 billion, a month-on-month increase of 2.69%, and yarn export volume was 11.01 million tons, a month-on-month decrease of 16.05%, and the import volume was 91,300 tons, a month-on-month decrease of 0.04%. The Vietnam Textile and Apparel Association (VITAS) stated that from January to July 2022, the textile trade surplus reached US$11.07 billion, a year-on-year increase of 31%, and created 1.9 million jobs, but it is still impossible to avoid pessimistic expectations for the industry in the second half of the year.
The Vietnam Textile and Apparel Association (VITAS) stated that the three major unfavorable factors affecting the decline of the industry in the next five months are as follows: First, the demand from major textile and apparel importing countries has weakened. Among them, the strict prevention and control measures taken by China, Japan and other countries have resulted in a reduction in bilateral trade volume and a periodic interruption of trade. Under the pressure of high inflation, the purchasing power of consumers in major importing countries such as the United States and the European Union has decreased, resulting in a sharp decline in global demand for textiles and clothing. With the conflict between Russia and Ukraine, the quantity and value of Vietnam’s textile and clothing exports to Russia and Ukraine are also declining. In addition, Vietnam’s currency has not depreciated as fast as its neighboring countries, so textile and clothing exports do not occupy a favorable position. The U.S. Xinjiang cotton ban policy and the European Union’s carbon emission plan have also brought great oppression to traders and companies in raw material procurement.
The second is labor shortage. Because this industry is labor-intensive, most workers chose to leave and did not return to work during the epidemic, and some employees chose to retire early due to high social insurance premiums. In addition, the operating costs of textile companies have increased and their financial status is shaky. Since the beginning of this year, the company’s operating costs have increased by about 25%, transportation costs have tripled, and shrinking profits have also hindered the company’s further expansion.