The year 2021 is a challenging year for the textile and garment manufacturing industry when facing the pressure of rising costs, disruption of production supply chains, and labor deficit. However, by the beginning of 2022, when Covid-19 is under control and workers return to work, the growth of the textile and garment industry has gradually recovered and grown again. The most obvious positive signal from the growth of the textile and garment industry is the continuous flow of garment orders. However, with the impact of the pandemic, the textile and garment industry in general still faces certain difficulties.
The situation of the textile and garment market in Q1/2022
The yarn and fabric industry is in trouble
According to the General Statistics Office Textile industry: In Q1/2022, Vietnam’s yarn production as well as fiber and yarn exports decreased significantly. Specifically, the total yarn production in Vietnam in the first quarter of 2022 decreased by 3.2% compared to the same period in 2021. In which, the production of natural fibers decreased by 0.1% and the production of artificial fibers decreased by 5.0% over the same period. Fiber and yarn exports also showed signs of slowing down after a strong growth in 2021, export volume decreased by 9.0% in Q1/2022. However, because yarn prices remained high, export turnover still increased by 18.9% over the same period.
Source: VIRAC, GSO
Besides, the textile dyeing industry also faced many challenges in Q1/2022. Specifically, production output in Vietnam in the first quarter of 2022 decreased by 4.1% compared to the same period in 2021 and only met about 25% of the total demands of the domestic market.
It can be seen that, up to the present time, the production activities of the Vietnamese fabric industry are still facing many difficulties. According to VIRAC, fabric production in Vietnam is still weak due to 3 main reasons. Firstly, the investment capital for each project is large, especially the technology and wastewater treatment systems are quite expensive, making the capital recovery time prolonged, leading to difficulties for medium and large enterprises. Small when wanting to invest in the industry. Secondly, the use of many chemicals in the printing and dyeing system can cause serious environmental pollution, so many localities have carefully considered or refused textile dyeing projects. Finally, domestic fabrics are mainly produced according to foreign designs, which makes fabric products in Vietnam lack creativity and reduce attractiveness to customers.
The garment industry recovers strongly
In the first quarter of 2022, the output of casual clothes produced by Vietnamese enterprises increased by 12.4% over the same period last year. Foreign markets such as the US and EU have reopened, the economy has recovered, and demand has increased. In addition, the Chinese Government still maintains the “Zero Covid” policy, causing orders to be unable to be fulfilled or delayed, many partners have transferred orders from China to Eastern countries. South Asia, including Vietnam. Besides, Vietnam has had a safe and flexible adaptation policy, effectively controlled the Covid-19 epidemic, and the production activities of garment enterprises have begun to recover and become stable as before. When there is an epidemic. In the first quarter of 2022, Vietnam’s total apparel retail sales reached VND 54.2 trillion, down 3.6% over the same period in 2021.
Forecast of textile and garment industry Q2/2022
The business results of the textile and garment industry in Q1/2022 have shown positive signs of recovery of the textile and garment industry after the 4th wave of the Covid epidemic. Accordingly, Vietnamese textile and garment industry in Q2/2022 is forecasted to have many prospects. Potential, especially for the garment industry. Besides the above growth drivers, Vietnam’s textile and garment industry will also face difficulties in terms of rising production costs. It is expected that the price of input materials for the textile industry such as cotton, fiber, yarn, and fabric will continue to increase; and logistics costs such as container prices and transportation costs have not shown any sign of decreasing. The increase in production costs will cause difficulties for businesses, especially when many businesses face financial difficulties.
Positive Recovery Potential
In 2022, textile and garment production has a stable positive outlook thanks to the recovery of the labor market. With the government’s “speedy” vaccination policy, workers can return to work with peace of mind thanks to the high vaccination rate. Not only that, the policies to increase the welfare of enterprises and the policy to support employees of the State also contribute to bringing the production activities of the textile and garment industry back to normal.
Not only that, the demand for textiles and garments in the international market is forecasted to recover in 2022. Global apparel retail sales will grow by 5.4% compared to 2021 thanks to the expectation of the recovery of the economies. Economy and economic growth after the pandemic will stimulate consumption of textiles. In which, the main export markets of Vietnam have positive prospects. Specifically, the US market has stable consumption demand and the opportunity to increase China’s market share in this market is rapidly decreasing, creating opportunities for Vietnam to penetrate the US market. The Japanese and Korean markets are also among the top potential export markets in the second half of 2022 thanks to the recovery in consumption demand and the boost to growth from the easing of rules of origin in the RCEP agreement. At the same time, the EU market is also expected to achieve an impressive level of revenue thanks to the recovery in consumption demand and boosting export growth from the EVFTA’s tax reduction road map.
Textile industry: There are some challenges
Besides the bright spots for the 2022 industry prospect, domestic textile enterprises still face a series of internal challenges such as: the price of input materials for the textile industry such as cotton, fiber, yarn, and fabric continue to trend. On the upward trend, logistics costs such as container prices and transportation costs are 3 times higher than the average in the past 5 years; The disadvantage of exchange rate makes Vietnam’s textile and garment less competitive against rivals, especially when many businesses are still facing financial difficulties. In addition, enterprises in the southern region still lack labor, while this region accounts for about 40% of the total exports turnover of the whole industry, which is also a challenge for enterprises in the textile and garment industry.
Although there are signs of improvement, many competitors of Vietnam’s textile and garment such as China, Bangladesh, India … also accelerated and made many efforts to make up for the shortfall in turnover in 2021. Increasing the competitiveness of Vietnam’s textile and garment in the international market.