Major Opportunities And Challenges For Vietnam'S Textile And Garment Industry

At present, Sino US economic and trade issues provide an opportunity for Vietnam to expand its textile and apparel exports to the US. As the United States imposed tariffs on Chinese textiles, overseas orders began to flow from China to Southeast Asia, including Vietnam. In the first two months of 2019, Vietnam's clothing exports increased by 10% over the same period last year.

The CPTPP agreement came into effect in January 14, 2019 and will promote Vietnam's textile and clothing exports in the future. However, Vietnam needs to purchase large quantities of raw materials (such as China) from non CPTPP countries, and it is a big challenge for Vietnam to abide by the provisions of the agreement. At present, Vietnam is negotiating a free trade agreement with the European Union, which is expected to be signed this year. The European Union is one of the main regions of Vietnam's clothing exports, accounting for 15% of Vietnam's clothing exports. In 2018, Vietnam's textile and clothing exports to the EU increased by 10.5% over the same period last year. If the two sides sign a free trade agreement, the EU's tariff relief to Vietnam will reach 12%.

In 2018, Vietnamese textile enterprises also experienced a difficult year. Cotton prices rose for most of the time, knowing that the peak reached 7-10 months, while yarn prices began to fall. At the same time, the United States imposed tariffs on Chinese cotton cloth, resulting in a reduction in demand for Vietnamese cotton yarn. Although Vietnamese cotton yarn exports to China increased by 3% over the same period in 2018, the main imports were Chinese funded enterprises, including investment enterprises in Taiwan, rather than local enterprises. Although the number of these foreign-funded enterprises is not much, the production capacity accounts for nearly half of the total yarn capacity. Because these enterprises need to supply the cotton yarn produced to their parent companies, the fluctuation of yarn price has little effect on them.

From July 2019 to March 2019, the price of Vietnamese cotton yarn exported to China fell, while cotton prices rose, and domestic cotton mill profits remained low. The yarn price difference fell to below US $1 / kg and it would suffer losses or even losses. In 2018, Vietnam exported nearly 1 million 500 thousand tons of yarn, an increase of 10% over the same period, including 1 million 50 thousand tons of cotton yarn exports. China, Korea and Turkey were the largest buyers, accounting for more than 80%.

In 2018/19, cotton imports in Vietnam were estimated to be 7 million 100 thousand packages, about 1 million 550 thousand tons, due to the weakening demand in China and the increase in yarn production costs. Nevertheless, Vietnam's cotton imports increased by 3% over the same period last year. In 2019/20, cotton imports in Vietnam are expected to be 7 million 600 thousand packages driven by opportunities for domestic textile expansion, increased foreign investment, and CPTPP and EU free trade agreements. Because Vietnam's main mills are China (including Taiwan) and South Korean investment, these enterprises have always believed in the United States cotton, so the future cotton will still occupy the dominant position of Vietnam's cotton imports. In 2018/19, American cotton still occupies the dominant position in Vietnam's cotton imports, with a market share of 52%.

Vietnam's cotton consumption is highly dependent on China, and Vietnam's exports of cotton yarn to China amounted to 735 thousand tons in 2017/18, accounting for 82%. In 2018/19, cotton consumption in Vietnam is estimated at 7 million 100 thousand packages, about 1 million 550 thousand tons. In 2019/20, cotton consumption in Vietnam is expected to increase to 7 million 500 thousand bales.