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Insight | Time: Aug 24 2020 3:11PM
Main Southeast Asian textile export countries saw orders shortage and falling exports
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Negative impact of COVID-19 on the global economy is deepening and expanding unceasingly, which also affects major participants in the global textile industry. For example, their exports fell, orders were insufficient, and some even applied for suspension of business and production cuts.

1.Vietnamese textile and apparel exports are expected to drop by 16% in 2020.

According to statistics from Vietnam Chamber of Commerce and Industry, the exports of various yarns in Jan-Jul 2020 decreased by 20.9% compared with that in the same period of 2019; Exports of fabrics decreased by 40% and those of processed textiles dropped by 12.1%. The VCCI reminded that in the second half of 2020, Vietnamese textile mills will need to strengthen the development of the Vietnamese domestic market and cut production and management costs to make up for their revenue, while maintaining product quality, resetting production lines and manpower deployment measures to weather the effects of the pandemic.

Global Data estimated that the Asia-Pacific region’s apparel and footwear industry will lose 95.4 billion USD in sales this year. Global textile industry sales value will decrease by 395.6 billion US dollars, down 19.5% from last year, accounting for 29.1% of the total retail industry revenue loss (1.3617 trillion US dollars).

On Aug 2, Vinatex forecasted that Vietnamese textile exports will continue to show a downward trend in the second half of 2020, with a decline of 14%-18%, so that the total textile exports in 2020 may reach 32.75 billion USD, down 16% compared with 2019. It was also reported that in end-July, most Vietnamese textile mills hardly received orders for high-value-added products such as suits and high-end shirts in the second half of 2020; orders for masks and protective clothing also dropped sharply due to sufficient international supplies. Based on this, if exports of masks and protective clothing decrease in the future, the Vietnamese textile industry will face greater difficulties in the last few months of 2020.

At present, the epidemic in the traditional export markets of Vietnamese textile products such as EU and US has not been fully controlled. Coupled with the epidemic in Vietnam, the production, operation and export activities of the Vietnamese textile industry are bound to be affected. The EU-Vietnam Free Trade Agreement (EVFTA), which came into effect on Aug 1, may not be able to bring the benefits of “timely rain” to the Vietnamese textile industry in the short term.

For the details of Vietnamese textile and apparel export, please see the previous article: Vietnamese textile and apparel export value dropped by 7.8% year-on-year in Jul 

2.Bangladesh exports in Jan 2021 will return to levels before the epidemic.

According to data from the Bangladesh Textile Mills Association, affected by the epidemic, Bangladesh's cotton imports in the 2019/20 fiscal year moved down by 13.4% year-on-year for the first time over a decade, reaching 7.1 million bales.

Most textile mills resumed production after lockdowns eased on May 30. Although the international cotton price has fallen sharply before, the mills were still consuming the cotton stocks piled up before, and many importing mills also delayed the delivery of goods from the ports. However, with the recovery of downstream demand, the inventory has been largely consumed, so the demand for cotton imports will increase from now on.

At present, the capacity of most apparel mills in Bangladesh has recovered to about 75%, which shows that orders are recovering smoothly. Industry sources said that if international buyers continue to purchase from Bangladesh at the current pace, the demand for Bangladesh cloth will continue to increase after Sep.

According to the situation introduced by the Bangladesh Textile Manufacturers Association, more than 50% of the annual cloth sales orders in Bangladesh have been fulfilled by July. It is expected that 75% will be completed by Sept, and all orders will be finished by end-2020. Exports will return to the level before the epidemic in Jan 2021.

For the details of Bangladesh’s apparel export, please see the previous article:Bangladesh's apparel export gradually recovered in Jun 

3.Less than 20% of Cambodia's cloth orders in the fourth quarter can be stable.

Under the dual pressure of the epidemic and the abolition of EBA (European Union Most Favored Nation Treatment), the Cambodian textile and apparel industry is facing great difficulties. Since the beginning of this year, about 250 companies have ceased operation or closed, and 150,000 workers have become unemployed, mainly female workers. According to the GMAC survey, it is estimated that only 30% of the member companies' orders in the third quarter will be the same as last year, and the rest will have declined to varying degrees. In the fourth quarter, less than 20% can be steady. Due to the abolition of EBA tariff preferential measures, the prices of Cambodian apparel products export to the EU market increased relatively, and orders from the EU dropped significantly. In order to save costs, many garment manufacturers are currently halting production. The Cambodian government has certain support for related companies. The company pays workers a minimum wage of 30 USD a month and the government subsidizes 40 USD.

4.Nearly 10 companies in Myanmar have applied to close their business who have no faith towards the outlook.

The Director of the Myanmar Investment and Company Administration (DICA) said that the Myanmar Investment Commission (MIC) has received applications for closure of approximately ten companies. According to the Myanmar Investment Law, the establishment of an enterprise approved by the MIC must be approved before it can officially cease business, and the taxation department must check the tax status. He said that due to the COVID-19, some companies are reducing the scale of production and are even forced to close temporarily or permanently, and some runaway mills do not pay workers' wages.

As of Jun 21 2020, 100 garment and textile companies and 63 other companies have closed, and more than 54,000 workers have lost their jobs. Now, 101 companies have resumed production and over 15,000 workers have returned to work.

The epidemic had a greater impact on Myanmar's economy, and the sharp drop in orders from EU and US has dealt a major blow to the future development of the apparel industry. The survey shows that 70% of apparel mills are not confident that orders will return to previous levels. Many companies are also seeking new development paths, such as the production of masks and other epidemic prevention materials.

5.Indonesian textile industry enjoyed windfall profits during the outbreak.

Since Indonesia has not yet deeply integrated into the global supply chain, the global health emergency triggered by the coronavirus may not have a serious impact on the Indonesian economy.

As factories look for alternative materials from anywhere other than China, Indonesian textile and apparel mills have received new domestic and international orders, which has increased by about 10%. While the Asian textile and apparel industry is facing bankruptcy and layoffs, Indonesian textile and apparel mills have made huge profits due to delays in shipments caused by the outbreak and spread of the epidemic.

Sutanto, deputy chief executive officer of PT PanBrothers, headquartered in Tangerang, said the company's demand is rising, and the growth rate in the second and third quarters was 20% higher than expected. The textile-to-apparel company initially predicted that sales would increase by 15% in 2020. Iwan Lukminto, CEO of PT Sri Rejeki Isman, one of Southeast Asia’s largest textile and apparel manufacturers, said the company’s orders have also seen an additional 15% increase.

All these orders were from local apparel mills that produce garments for global brands. With the approval of the Indonesia-Australia Free Trade Agreement, sales of textiles and apparel are expected to rise, and the windfall brought about by the COVID-19 will follow. According to the "Indonesia-Australia Free Trade Agreement," Australia will cut 5% import tariffs on textiles and apparels.

6.Mills in Laos generally face shortage of orders.

Apparel industry in Laos is small but struggled the most during the pandemic. Xaybandith, chairman of the Lao Garment Industry Association, said that the old apparel industry is highly dependent on imports, and the closure of ports due to the epidemic has had a significant impact on the supply of feedstock for the industry. Imports from Thailand, China, Vietnam and other places are still relatively smooth, but import inspections are extremely strict. Since April, mills where there are employee dormitories or employees living near the mills can obtain the start-up certificate for production, so the vitality of the entire industry has been seriously insufficient. Some hoped to find new exports by converting production of anti-epidemic materials, but due to various reasons such as feedstock and equipment, only three mills have successfully shifted production. Lao apparel mills are now generally facing a shortage of orders and will face greater pressure for future development.

7.Thailand's textile and apparel exports fell 17% year-on-year, and apparel mills mostly cut output.

Thailand has a relatively complete textile and apparel industry chain, but the impact of the epidemic on Thailand's industry cannot be underestimated. Jumnong, chairman of the National Textile Industry Federation of Thailand, said that the export of Thailand's textile and apparel industry has fallen by 17% year-on-year, while the imports have fallen by 19%. Among them, imports from China decreased by 12%, and those from ASEAN decreased by 16%. Due to insufficient orders, most Thailand textile and apparel mills are currently operating by reducing production, and some only operate 4 days a week. Printing and dyeing mills that were originally operating at full capacity are currently shut down for one day a week. At the same time, the collection of existing orders is also more difficult. However, the epidemic may also be a double-edged sword. Some mills are looking for new ways in the crisis, developing antibacterial products and exporting them to Japan, gain better achievement. In 2020, some mills have looked for new opportunities and expanded their production capacity, and more than a dozen new mills have started operation. The ThaiTex project with government support is also actively supporting the development of the industry.

Source: Wuxingbushang
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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