Companies face closure amid Chinese raw material shortage

By Anh Minh   February 27, 2020 | 01:08 am PT
Companies face closure amid Chinese raw material shortage
Women work at a garment factory in northern Vietnam. Photo by Reuters.
Textile, footwear and electronics producers in Vietnam are running low on feedstock and might have to suspend production if the Covid-19 epidemic continues.

Many companies only have enough to maintain production until March, Truong Thanh Hoai, head of the Ministry of Industry and Trade’s Industry Agency, said at a meeting held on Wednesday to discuss how to help affected industries.

China, the country hardest hit by the epidemic, is the largest source of intermediate goods for Vietnam's industries besides being a leading consumer of their products. 

Hoai said textile and garment, footwear and electronics are among the sectors directly affected by the epidemic.

The automobile industry, which imports over 70 percent of components from China, would start suffering from shortages by the end of the first quarter, he said.

"Many companies only have enough production materials to last until March or early April. After this, if the Covid-19 epidemic continues, they will have to partially or completely halt production."

Earlier this month Truong Van Cam, vice chairman of the Vietnam Textile and Apparel Association, had suggested that many companies would have to be shut down and if the feedstock shortage persists after March.

Nguyen Xuan Duong, chairman of Hung Yen Garment Corporation, told VnExpress his company only has enough to hold out until the end of this month.

Along with the possibility of partners canceling orders due to delayed deliveries, this could cause the company millions of dollars in losses if the epidemic persists until the second quarter.

Le Tien Truong, general director of the Vietnam National Textile and Garment Group, said many of his company’s subsidiaries have had to negotiate with partners to delay delivery by two to three weeks due to raw material shortages. 

A delay in delivery of half a month could cause losses of $1.5-2 billion for the textile and garment industry.

The shortages caused by the epidemic in China and South Korea have had an impact on Vietnam's industrial production in the first two months of the year.

Manufacturing only grew by 6.2 percent in the period, a 2 percentage point decrease year-on-year. 

Minister of Industry and Trade Tran Tuan Anh has instructed ministry agencies to monitor the situation and make forecasts, besides adopting counter measures, since demand in major markets would also be affected by the epidemic. "We are not pessimistic ... but we must remain proactive."

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