Low foreign demand to hold back Vietnamese textile

Although Vietnam's textile and garment exports were riding high in the first half of the year with growth of 22%, insiders are pessimistic that the rest of 2022 would not match up.

Nguyen Van Thoi, chairman of TNG Investment and Trading JSC, was concerned that the Federal Reserve's benchmark hikes amid high inflation would depress consumption demand in the U.S. Similar issues would also hamper export to the EU.

As the U.S. and EU are two major importers of Vietnamese textiles and garments, falling demand would drag down imports, to the detriment of Vietnamese exporters.

“Vietnam's textile and garment sector set an export target of $43-44 billion this year, but I don’t think it would achieve the target. Exports are likely to grow around 5% year-on-year," he said.

Thoi also revealed that foreign firms had previously placed orders for Vietnamese garments six months in advance, but now have to reduce the time window to three months due to the high stock of unsold products caused by low domestic spending.

Than Duc Viet, general director of Garment 10 Corporation, claimed that the number of placed orders for his company’s products is large enough to keep it busy until late 2022.

However, there is a risk that foreign firms might reduce or cancel their orders to deal with mounting stock of unsold products. Higher fuel and material costs, coupled with weak demand from abroad, are eroding the company's profit margin, he added.

Khong Van Tai, director of Factory 8 under the Ho Guom Group, said, "The outlook for garment exports is not very bright until year-end. Previously, our partners were always eager to place orders, but their demand has grown lukewarm."

Tran Nhu Tung, chairman of Thanh Cong Textile Garment Investment Trading JSC, shared the concern.

He expected demand for Vietnamese garments would drop further in the fourth quarter since the U.S. has begun to implement the Uyghur Forced Labor Prevention Act, making firms more cautious about garment imports. This bill imposes various restrictions related to China's Xinjiang Uyghur Autonomous region, including by prohibiting certain imports from Xinjiang.

"Firms are uncertain about the future, so they cut down on garment imports to avoid risks," he explained.

Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association, forecast that global demand for Vietnamese garments would grow more volatile in the second half of this year.

High inflation in the U.S. and EU would cause prices to skyrocket, effectively eroding consumer purchasing power. As weak purchasing power reduces consumer demand, textile firms are likely to feel the pinch for the rest of the year.

To deal with the situation, Giang recommended that Vietnamese producers seek customers elsewhere and be less dependent on the U.S. and EU markets.

"Vietnamese producers have to find new partners in other markets to fill the demand gap left by those in the U.S.," he added.

Viet of Garment 10 revealed that his company has to adjust its production plan more frequently to deal with volatile demand. "Previously, we adjusted the production plan quarterly or monthly, but now we have to do so weekly or daily. We have no other choice because it is the only way to adapt to the volatility," he said.

Viet recommended that Vietnamese producers go greener to gain ground in high-demand markets, thereby offsetting the demand contraction in traditional markets.

He also suggested producers not shed staff but temporarily shift their production to other products to keep the ball rolling while waiting for demand recovery.

Lastly, he urged producers to add more value to their existing product lines to carve out a niche in traditional markets.

Statistics from the General Statistics Office show that Vietnam's export turnover of textiles and garments reached $18.65 billion in the first half of the year, up 21.6% year-on-year.