March 31, 2020 20:40

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Textile and footwear enterprises in short supply of raw materials

09:21 | 23/02/2020

VCN- Because supply depends on the Chinese market, garment and footwear enterprises in Ho Chi Minh City are facing a big challenge of raw materials and accessories due to the Covid-19 epidemic.

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Textile enterprises in Ho Chi Minh City are very worried about the lack of raw material supply. Photo: Nguyen Hue.

Textile worries

Reporting to the leaders of the Department of Industry and Trade of Ho Chi Minh City on the situation of production materials for the textile industry in ameeting onthe 12th of February, Ms. Khuu Thi Thanh Thuy, General Secretary of Ho Chi Minh City Textile and Garment Association, said textile enterprises usually import raw materials from the fourth quarter of the previous year to the first quarter of the following year. Therefore, most businesses are very worried because raw materials aresufficientuntil March this year. If in February enterprises are not able tosolve the problem of importing raw materials, in April enterprises willnot have raw materials for production. Enterprises are very worried when 70-80 percent of raw materials forthe textile industry depend on the Chinese market.

According to the analysis by Ho Chi Minh City Association of Textile, Embroidery and Knitting, businesses are facing a risk of lack of raw materials in April and May. The shortage mainly focuses on enterprises specializing in export production. In the group of small and medium enterprises with the ratio of export and domestic consumption of 50:50, the source of raw materials for production depends heavily on the group of large enterprises. The remaining group of enterprises, mainly producing for the domestic market (including modern retail channels and traditional markets), is forecastto not only be short of immediate raw materials but also affect outputs because since the virus outbreakshops and shopping centers have beenvery empty. Statistics of retail sales of some brands in modern retail channels during the Covid-19 epidemic fell sharply compared to the same period last year.

Vietnam Textile and Apparel Association (Vitas) recently asked its member companies to send reports on the impact of the virusso that the association could report to the Government.

According to Vitas leaders, Vietnam's textile and apparel industry has a great two-way trade relationship with China. Notably, raw materials (yarn, fabric and accessories) are being imported mainly from China, of which fabric imports account for nearly 60 percent of the total US$13.5 billion in2019; fiber accounts for 55 percent, with US$2.42 billion.

As reflected by many businesses, the Covid-19 epidemic has had an adverse impact on the industry's production and business activities. In order to minimize the negative impacts on production and business, Vitas requires its member enterprises to discuss with customers, focus on exploiting domestic raw materials and auxiliary materials or other countries to replace imported raw materials and accessories from China, ensuring the maintenance of production and business, stabilizing the morale and life of workers. Vitas also asked businesses to closely monitor the epidemic and the time of closing and opening ofborder gates of China and other countries with infected people for timely solutions.

As an enterprise specializing in providing high-class garments and leather goods, Eurolink Joint Stock Company (Hoang Mai Industrial Park, Hanoi), also faces difficulties in terms of raw materials and accessories.

Mr. Nguyen Huu Thanh, Director of the company, said thatthe company's production results in 2019 exceeded 6 percent of the plan, while profit reached 104 percent. Therefore, when implementing the 2020 mission, when there was no information on the Covid-19 epidemic, the company set a target of 120 percent revenue growth compared to 2019.

However, the shortage of raw materials is making the production and business activities in the first quarter of 2020 difficult. The company's plans to participate in exhibition programs and trade fairs for development in the period of 2020 – 2025are also affected. “The company will adjust its goals and plans to better suit the actual situation. In addition, businesses are also learning about supplies and raw materials from markets such as India and Europe to maintain production,"Thanh said.

Difficulties for leather and shoes

Footwear enterprises are also facing pressure on raw material sources due to the epidemic. Mr. Nguyen Chi Trung, Chairman of the Board of Directors of Gia Dinh Group, said that Covid-19 has greatly affected Vietnamese businesses, especially footwear enterprises. Before Tet, theyimported enough raw materials to produce inthe first quarter. The following months will be uncertain. China is a supplier of many raw materials for Vietnamese leather and footwear enterprises. In the worst case, thecompany will beforced to import raw materials from other countries such as Korea, Japan, and Bangladesh.

A representative of a footwear enterprise in Binh Duong said that this company had signed a processing order until August this year, so raw materials were also available for2-3 months. Although the source of raw materials is mainly from Guangzhou, the sources of production comes from many other Chinese cities. If the epidemic is prolonged, the supply of goods, transportation andproduction will be greatly affected. Currently, enterprises still have to monitor regularly to have timely solutions, in the worst case, to suspend or delay production. In addition to pressure on raw materials, the company's difficulty is that some Chinese experts who come to their hometowns to celebrate the lunar new yearare currently unable to come to Vietnam because of the ban on going abroad.

Mr. Nguyen Thanh Tung, Director of Ha Tay Textile and Garment Co., Ltd, said thatthe maximum capacity of the enterprise reaches 120,000 pairs of shoes per month with main export markets being Europe, England, Japan and South Korea. Sixty percent of the company's products are exported to the UK.

Like many other leather and footwear enterprises, the company also mainly imports materials from China, so the Covid-19 epidemic caused considerable concern.

Currently, the company's raw materials are only enough to produce until mid-March. In the immediate future, the company has added a number of orders, including orders from Korean partners, using 100 percent domestic raw materials. So, the difficulties in the short-term will be mitigated.

To ensure long-term production, the company has planned to find sources of goods from domestic enterprises instead, and actively contact partners to consider equivalent materials that can be replaced.

According to Mr. Nguyen Van Khanh, General Secretary of Ho Chi Minh City Leather and Footwear Association, raw materials have always been a problem for the leather and footwear industry. With a large source of raw materials dependent on China, the production of leather and footwear enterprises is always under pressure when changes in raw materials occur. Currently, businesses are greatly affected by the Covid-19 epidemic, when there is only about one month left without raw materials for production.

By Nguyen Hue /Bui Diep