Yarn exports suffer from trade war

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Yarn production technology at the textile exhibition held in Ho Chi Minh City: Photo: Nguyen Hue

With the export results of the first six months, the difficulties of the yarn industry may last until the end of 2019. According to the analysis of Bao Viet Securities Joint Stock Company, concerns about the decline in consumer demand from global economic uncertainties and risks from the US-China trade war, the tendency of protection in international trade as well as the unpredictable future of the Brexit process have caused producers and brands to cut or temporarily postpone orders, of which the yarn industry will be the first affected industry.

According to experts in the industry, the trade war has impacted the Vietnamese yarn industry because China is the key export market, accounting for more than 60 percent of Vietnam’s total yarn export turnover. Therefore, any changes to the China’s textile and garment industry will have a big impact on Vietnam's yarn industry.

Vietnam's yarn exports closely follow the development of the US-China trade war. From May to September 2018, Vietnam's average yarn export turnover decreased by 2.5 percent every month. Vietnam’s yarn export price to China has dropped from an average of US$3.05 per kg to US$2.99 per kg, down by 1.97 percent.

On September 17, 2018, a 10 percent levy on $200 billion worth of Chinese goods to the US took effect and the yarn market was immediately affected. Vietnam’s yarn export turnover in October 2018 decreased by 7.19 percent compared to the previous month (equivalent to US$23.76 million), of which yarn exports to China fell by over 22 percent from US$218.33 million to US$172.98 million, equivalent to a decrease of US$45.4 million.

In the first six months of 2019, Vietnam's yarn exports to China also declined by 80% in volume over the previous year. According to analysts, there were many reasons for the sharp decline including the trade war that affected China’s textile and fiber industries. Currently, China has huge inventory of fabrics, so a series of textile factories have had to close. This caused Vietnam’s yarn exports to China to decrease.

According to the Vietnam Cotton and Spinning Association, the trade war has caused many difficulties for Vietnamese yarn exporters due to a lack of new orders from the Chinese market or low prices offered by customers. Although other markets such as South Korea, Japan, Egypt, Turkey, Philippines and Taiwan still have orders, the quantity is not significant.

In addition, fierce competition on orders from domestic FDI enterprises and enterprises from competing countries such as India, Thailand, Indonesia, Pakistan and the downward trend in selling prices also cause challenges for yarn enterprises.

With the possibility of the US-China trade war continuing, experts said that yarn enterprises need to have appropriate production plans to make good preparations for the movements of the market.

Exports of garment-textile, leather shoes surge 10.5 percent Vietnam’s export turnover of garment-textile and leather shoes during January-July grew 10.5 percent year-on-year to 18.34 billion ...

Chairman of Vietnam Textile and Apparel Association Vu Duc Giang said that the yarn industry has begun to shift to the Japanese, South Korean and Middle Eastern markets. Some products have been exported to Taiwan. Its flexibility is expected to help the yarn industry stand firm against the sharp decline of the Chinese market with export turnover in 2019 expected to reach about US$30 billion.