Textile producers face closure as coronavirus cripples imports

Truong Van Cam, deputy chairman of Vietnam Textile and Apparel Association (VITAS), told a recent forum many small and medium textile producers would run out of feedstock by the end of this month and may have to close down next month.

These companies, which account for around 90 percent of the industry, have reduced working hours, with supply orders remaining unfulfilled due to the coronavirus, he explained.

Limited cross-border trade with China, where 60 percent of textile materials are sourced, have seen producers struggle to supply buyers in Thailand, Indonesia, South Korea and Japan, it was added.

In Binh Xuyen District of northern Vinh Phuc Province, where a lock down order serves to contain the spread of the virus, many garment factories are running at minimum capacity as staff are quarantined.

Exports to China are also struggling. Vietnam Cotton and Spinning Association (VCOSA) stated most producers had reported plummeting cotton orders from the country, and are concerned about this year’s profits.

Vietnam’s textile exports in January fell 23.5 percent year-on-year, while imports fell 28.5 percent.

“The industry has never seen such a steep drop,” said Cam, blaming the seven-day Lunar New Year holiday (January 23-29) and coronavirus outbreak.

Fitch Solutions, a unit of credit rating firm Fitch Group, said small and medium textile producers would struggle to tap an alternative source of input, with unemployment and closures expected.

Tran Thanh Hai, deputy head of the Trade Department, said even after the epidemic is contained the industry would still struggle due to its reliance on Chinese imports.

Some companies have been looking for alternative markets as Chinese businesses won’t resume full operation until mid-March, with Indonesia, India, Bangladesh and Brazil potential sources.

Insiders have proposed lower road and port tariffs to support textile companies amid the outbreak.

Textiles were among the largest export categories in Vietnam last year with a value of $32.8 billion, up 7.8 percent from 2018.

The U.S. was the largest export market, followed by the E.U. and Japan.