Textile, footwear firms in a stitch as coronavirus infects material sourcing

By Dat Nguyen   February 6, 2020 | 04:37 pm PT
Textile, footwear firms in a stitch as coronavirus infects material sourcing
Laborers work at a garment factory in Hanoi. Photo by Reuters/Kham.
Vietnamese textile and footwear manufacturers are struggling to import material from China where the new coronavirus outbreak has resulted in factories being shut down.

Vietnam Textile and Apparel Association (VITAS) recently advised textile companies to tap other markets to meet production targets.

The move came as a response to the novel coronavirus (nCoV) continuing to claim lives in China, which in 2019, accounted for almost 60 percent of Vietnam’s garment imports, and 55 percent of fiber, according to VITAS.

Tran Van Dang, owner of a handbag manufacturer in District 3, Ho Chi Minh City that regularly sources material from China, said there was no leather left when his factory resumed operation on Monday, following the seven-day Lunar New Year, or Tet break.

"If we cannot import more material from China this week, production will cease next week," he told local media.

Another manufacturer in Go Vap District said his Chinese suppliers still let workers stay home to avoid spreading the nCoV, meaning his stock will run out in two weeks.

Truong Thi Thuy Lien, CEO of Lien Phat Footwear in southern Binh Duong Province, has enough material for the next three months, but remains concerned because the deadly virus is still spreading across China.

"If the disease persists, our supply and transport chain will be in trouble. In the worst case scenario, manufacturing will have to stop or be delayed."

Many clothes sellers in An Dong Market of District 5, HCMC have not been able to order more stock from China where factories have yet to resume operations, having to pay VND2 million ($86) a day in stall rent.

Dieu, a seller at the market, said: "Usually by this time each year I have received 3-4 packages from China. But so far, none have arrived, and we might have to continue waiting for weeks."

Other sectors have also reported challenges in acquiring materials as China shuts down manufacturing in many cities to contain the nCoV outbreak. In central Hubei Province, where the majority of nCoV-related deaths have occured, factories will not resume production until February 14 and could run on a limited scale after that.

Nguyen Quoc Anh, chairman of Ho Chi Minh City Rubber Plastic Manufacturer Association (HRPMA), said production of rubber and plastic in Vietnam is largely dependent on China with 70 percent of materials imported from the country.

Anh, also CEO of rubber firm Duc Minh, said the company’s material will run out in a month. If Chinese suppliers still cannot provide more material by that time, the company would have to source from Japan and South Korea where prices are 15-20 percent higher.

"Profitability will be challenged by higher material costs as we have fixed prices with customers since the end of last year."

Leading stock brokerage SSI Securities Corporation (SSI) noted the nCoV outbreak could negatively impact on 10 major industries in Vietnam, including textiles, as Chinese factories close down.

In January, Vietnam’s imports of fabric from China fell 18.1 percent to $950 million, according to General Statistics Office (GSO).

Exports of textiles, a key sector, in all markets fell 21 percent year-on-year to $2.6 billion in January, while that of footwear fell 9.7 percent to $1.6 billion, it added.

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