Due to the uncertain global economic outlook, Vietnam’s cotton import volume in 2019/20 has been reduced from 7.6 million bales to 7.2 million bales, and the proportion of US cotton will still reach about 55%.
According to the Vietnam Textile and Apparel Association, Vietnam’s textile and apparel exports in 2018 were US$36 billion, year-on-year. An increase of 16%, and it is planned to reach US$40 billion in 2019, a year-on-year increase of 11%.
The current Sino-US trade dispute provides an opportunity for Vietnam to expand its apparel exports to the United States. As the United States imposed additional tariffs on Chinese clothing, some overseas orders flowed from China to Southeast Asian countries, including Vietnam. The United States is the largest buyer of Vietnamese clothing, accounting for more than 35% of Vietnam’s clothing exports. In 2018, Vietnam’s apparel exports to the United States were close to US$14 billion, a year-on-year increase of 12%. This trend was maintained from January to February 2019.
The CPTPP agreement, which was implemented on January 14, 2019, is expected to stimulate Vietnam’s textile and apparel exports, but its strict regulations on the origin of yarn are a big problem for Vietnam Challenges because raw materials for Vietnam’s clothing production heavily come from non-CPTPP countries, especially China. However, CPTPP may help Vietnam attract more foreign direct investment.
In June 2019, the EU and Vietnam signed a free trade agreement, which is another new opportunity for Vietnam to promote textile and apparel exports. The EU is one of the largest buyers of Vietnamese clothing, accounting for 15% of Vietnam’s clothing exports. In 2018, Vietnam’s textile and apparel exports to the EU increased by 10.5% year-on-year. After the implementation of the agreement, tariffs on Vietnamese clothing exports to the EU will drop by 12%.
However, Vietnam’s textile and apparel industry may face other adjustments because these free trade agreements have strict origin requirements and production costs will increase a lot. At the same time, Vietnamese textile mills also face challenges caused by fluctuations in cotton and cotton yarn prices and declining export demand due to the trade war. Cotton prices rose steadily throughout most of 2018, reaching their highest levels from July to October 2018. During the same period, the price of yarn exported from Vietnam to China has gradually dropped, and the profits of textile mills are very small. When the price difference of floral yarn is less than 1 US dollars/kg, the textile mills will lose money.
In 2018, Vietnam’s cotton yarn exports to China increased by 3% year-on-year, and from January to August 2019, they increased by 19% year-on-year, but most of the growth came from investments in China and Taiwan. Textile companies. Although the number of these enterprises is not large, their spindle output accounts for nearly half of Vietnam’s total output. Since the yarn produced by these mills is mainly supplied to parent companies in China, they are not sensitive to yarn price fluctuations.
Vietnam’s local yarn mills are paying close attention to the current Sino-US trade dispute. The obvious increase in minimum wages and electricity bills since the beginning of 2019 has put great pressure on the yarn mills, and also put a lot of pressure on the yarn mills. It will have a serious impact on thread production and may weaken Vietnam’s cotton yarn export competitiveness. In 2019, Vietnam’s cotton yarn export volume is expected to increase. The export volume from January to October was 1.4 million tons, a year-on-year increase of 14.8%, but the export value only increased by 3.6%, indicating that the current price decline makes it difficult for yarn mills to survive. Currently, China, South Korea and Turkey are the largest buyers of Vietnamese cotton yarn, accounting for more than 80% of Vietnam’s cotton yarn exports. The decline in the Turkish and Korean markets has been offset by the increase in demand in the Chinese market.
According to Vietnam Customs data, Vietnam’s cotton import volume in 2018/19 was 1.51 million tons, which was the same as the same period last year. In 2019/20, it is estimated to be 1.57 million tons. The main import sources are the United States, India, Brazil, Australia and Cote d’Ivoire, which together account for 70-80% of Vietnam’s total cotton imports. In 2019/20, Vietnam’s imports of US cotton are expected to reach 870,000 tons, a year-on-year increase of 5%.
Driven by cotton yarn exports, Vietnam’s cotton consumption continues to grow. Of the cotton imported by Vietnam, 80% is made into cotton yarn and exported, while the rest is digested domestically. Vietnam’s cotton consumption relies heavily on China’s demand for cotton yarn. In 2019, Vietnam’s cotton yarn exports to China are expected to be 800,000 tons, accounting for 80% of all cotton yarn exports. Therefore, China’s cotton and cotton yarn policies will have a huge impact on Vietnam’s cotton yarn production and exports. The current Sino-US trade friction It will have a serious impact on Vietnam’s spinning industry. In 2018/19, Vietnam’s cotton yarn consumption is expected to be 1.51 million tons, and in 2019/20 it is expected to be 1.57 million tons.
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