The epidemic worsens, a large number of foundries are closed, and the supply chain is chaotic, hindering the supply of goods by European and American multinational companies

As a major producer of clothing and footwear, Vietnam has recently worsened the situation of the new crown epidemic, and strict epidemic prevention measures have forced a large number of foundry factories in Vietnam to close. This has brought considerable potential risks to the supply of goods by many large European and American multinational companies. Some brands have expressed that they are considering price increases, and some brands have transferred some of their production capacity back to China.

According to the latest data on the epidemic, there were 12,096 newly confirmed cases in Vietnam on August 25. The number of newly confirmed cases in a single day in the past week exceeded 10,000.

It is understood that only 2% of the country's 98 million people are fully vaccinated, and the rate of vaccination in the textile and apparel industry in Vietnam is still very low. The American Apparel and Footwear Association (AAFA) and two other associations sent a letter to the Prime Minister of Vietnam, pleading with the Vietnamese government to prioritize the vaccinations of workers in the clothing, footwear and tourism production sectors.

The CEO of AAFA wrote in the letter: "The United States has provided 5 million doses of vaccines, and we are calling on our government to provide more vaccines urgently. We hope that you will prioritize these donated materials in key industries and the South. Because of the high concentration of economic activities that are vital to economic health in the southern region, there are many new cases."

Judging from the statistics from 2013 to 2019, Vietnam is the third largest producer of footwear products after China and India. In recent years, Vietnam’s clothing exports have also ranked among the top five in the world. For some brands, Vietnam is particularly important in their supply chain.

For example, 28% of Adidas products come from Vietnam. In fiscal 2020, almost half of Nike brand shoes will be supplied by contract factories in Vietnam, but in July at least three Nike supplier factories in Vietnam ceased production, July 19. On the same day, Standard & Poor's Global Markets Caizhi issued a report warning: Nike shoes made in Vietnam may run out.

This type of production interruption will also bring direct losses to major brands. Adidas said earlier this month that most of its suppliers in Vietnam have no longer available production capacity since mid-July, and are expected to suffer losses in the second half of the year. $600 million in sales. The company also pointed out that this production interruption will make it unable to fully meet the strong demand and will consider price increases. At the same time, some large brands have already begun to re-adjust their supply chains.

Affected by geological risk factors such as trade frictions, some brands began to transfer production capacity from China to Vietnam and other countries before the epidemic. Part of the production capacity has already been transferred back to China this year. The person in charge of the company said that the current supply situation in Vietnam is very unstable.

Andy Hu, chief investment officer of an asset management company in Vietnam, said: Now everyone is concerned about how to obtain the new crown vaccine, and this will take some time. Vietnam is now facing some problems, but I think there should be some in the next few months. Vaccines come in so that more people can be vaccinated. If all goes well, I think maybe production will return to normal between the end of this year and the beginning of next year.

In mid-August, more than 80 American apparel and footwear companies, including Nike and GAP, have jointly sent a letter to Biden, asking the United States to speed up its vaccine donation to Vietnam.

The latest news shows that Cuba will provide Vietnam with vaccines and technology transfer, and the relevant Vietnamese authorities have recently admitted some problems with the current epidemic prevention and control measures and may consider adjustments.

In addition, we can also see further chaos in the US supply chain in Bangladesh. It is reported that during the fourth wave of the outbreak, 4,500 garment factories reopened on August 1 despite the advice of health officials. Large factories supporting North American and European companies are still operating. As of August 24, the daily infection rate in Bangladesh was 15.12%. However, no matter how many products these factories produce, or even risking the lives of their workers, the circulation of products is slow because the ports are heavily congested.