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YARN REPORT
much below Cotlook A index, the global spot price benchmark but was above domestic spot price for benchmark Gujarat Shankar-6. During the month, Cotlook averaged
US$93.60 per pound while Shankar-6 was at US cents 77.99 per pound, keeping Indian cotton competitive in the global market.
MARKET REPORT
D
VIETNAM: COTTON MARKET REPORT
ue to the ongoing COVID-19 pandemic, which has impacted many of Vietnam's main business partners, including China, Korea, Japan, the United States, and the EU, Post forecasts that Vietnam's cotton imports for marketing year (MY) 2019/2020 will be reduced to 1.28 million metric tons (MMT), or 5.90 million bales. The pandemic has slowed demand for clothing and has had a major effect on cotton imports into Vietnam. In MY19/20, US cotton exports to Vietnam are forecast to be 707,000MT, or 3.24 million bales, down 15% from the previous year. Despite this downturn, Post predicts that the United States will retain its 55 percent market share. Post predicts that Vietnam's cotton imports will increase by 10% in MY20/21, with 1.42 MMT or 6.5 million bales imported. Cotton from the United States is expected to achieve a market share of 60%. This forecast is subject to ongoing COVID-19 developments; for the most up-to-date information, see the Cotton and Products Semiannual in November 2020. Setting and perspective Textile Industry The textile and garment sector in Vietnam remains one of the country's most important export sectors, contributing significantly to the country's GDP growth and employing 2.8 million people. Export sales in the calendar year (CY) 2019 hit $37.6 billion, up 7.4% from the previous year, according to trade data from Vietnam Customs. Despite being important, this growth fell short of the 11 percent target set by the Vietnam Textile and Apparel Association (VITAS) at the start of the year. VITAS reported Vietnam's textile and garment exports to be between $41.5 and $42 billion in CY20. COVID-19, which has impacted the United States and the EU, Vietnam's two main textile markets, has broken these hopes. For both material supply and yarn use, the textile and apparel industry in Vietnam is heavily reliant on China. Vietnam imports 60% of its clothing, 55% of its yarn and fiber, and 45% of its trims from China. Furthermore,
MARCH 2021
China receives approximately 60% of total yarn exports from Vietnam and 80% of cotton yarn exports. As a result, even minor changes in China would influence the textile and apparel industries in Vietnam. Many Chinese factories had to minimize or halt operations when China was under siege, sparking concerns of supply shortages in Vietnam's textile and garment industry. As a result, Chinese fabric imports fell 19 percent to $813 million in the first two months of 2020, compared to the same period last year. Though fears about Chinese supplies have subsided after Chinese factories started to reopen in late February 2020, Vietnamese garment producers began facing a new challenge in March of this year as the COVID-19 outbreak spread across the US and EU, Vietnam's two largest customers. According to Vietnam Customs, Vietnam's textile and garment exports to the United States and the European Union totaled $19.2 billion in 2019, accounting for more than half of the country's total textile and garment exports. While exports to the EU increased just 4% to $4.3 billion in 2019, exports to the EU are expected to skyrocket once the EU-Vietnam Free Trade Agreement (EVFTA) is ratified. The EU ratified the EVFTA on February 12, 2020, and Vietnam is due to ratify it in May 2020. The EVFTA would eliminate the existing tariffs of up to 12% on textiles and garments manufactured in Vietnam. In response to COVID-19, the US and the EU temporarily shut down borders, schools, and non-essential stores, restricted travel, and reduced commercial flights. Store closures have decreased consumer demand, which has started to affect Vietnamese textile and apparel exports. Customers in the United States and Europe have already suspended or cancelled orders, according to several Vietnamese garment manufacturers. Exports to member countries of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and other conventional markets like South Korea and Japan have also slowed because of COVID-19. According to industry sources, if the flu pandemic in the United States and Europe lasts until May, many Vietnamese garment manufacturers will face severe financial hardship, possibly leading to bankruptcy.
