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| Businesses are actively participating in the fair in the hope of finding new orders to compensate for the recent decline. Photo: TL |
Difficulties continue
The global trade update report of the United Nations Conference on Trade and Development (UNCTAD) forecasts that global trade in goods will decrease by nearly 2,000 billion USD, equivalent to a decrease of 8% in 2024, partly due to ineffective exports of developing economies in East Asia, another part is affected by falling demand in developed countries as well as falling commodity prices.
In a recently published report, SSI Securities Company pointed out that, although current forecasts lean towards the possibility of a soft landing for the US economy, it still shows that the overall growth momentum of the world economy is still slowing down and lower than the period before the Covid-19 pandemic, due to the delayed impact of the tightening monetary policy of the 2022-2023 period. The world continues to fragment, competition with major powers increases, and geopolitical risks are difficult to alleviate…
This decline will certainly have a significant impact on Vietnam’s export enterprises.
Mr. Nguyen Quoc Anh, Chairman of Ho Chi Minh City Rubber and Plastic Association, Director of Duc Minh Company, said that compared to 2023, the company’s export orders have decreased by 25-30% and customers have not made any promises about it will increase orders this year. For businesses in the Ho Chi Minh City Rubber and Plastic Association, the number of orders is still very low.
With the wood export industry, Mr. Tran Quoc Manh, Vice Chairman of the Handicrafts Association, Chairman of the Board of Directors of Saigon Production and Trade Development Joint Stock Company (SADACO), said that large orders are almost gone. Enterprises no longer export massively with orders of up to hundreds of containers like before, instead, enterprises have to focus on making sample products for customers. At SADACO, there was a time when the sample volume accounted for 40-50% of the total export volume. This causes businesses to encounter many difficulties because making samples requires a great deal of effort and meticulousness while prices do not increase commensurately.
In the textile and garment sector, SSI’s report said that fashion retailers are facing many different challenges, including high inventory levels, low consumer demand, and increased competition. As a result, fashion brands will likely step up their business defenses and suppliers will suffer a greater impact from reduced order demand as the problem spreads throughout the supply chain. Furthermore, inventory management and cost control will continue to be a key focus for retailers. This will lead to shortened ordering times and reduced selling prices for textile and garment processing enterprises.
According to SSI’s observations, the average selling price and textile consumption output in the fourth quarter of 2023 only improved slightly and the inventory level of US businesses remained high, even though this is the peak season. In January 2024, the average selling price and number of orders continued to be low, in which the average selling price decreased by about 20-30% compared to the same period in 2023.
In addition to difficulties with orders, instability in the Red Sea has caused shipping costs from Vietnam to the US and Europe to more than double in January 2024 compared to December 2023. Furthermore, as tensions escalate, delivery times and insurance costs increase. Although most exporters use the FOB method, whereby the buyer must bear shipping costs, however, due to low demand and high inventory levels, the buyer can renegotiate with the supplier to share the burden. Therefore, export businesses may have to bear higher selling costs or lower selling prices in the first quarter of 2024 until the Red Sea situation cools down.
Mr. Tran Quoc Manh said that currently, the cost of exporting each container to the US is up to 4,000 USD, a very high increase compared to the previous level of just over 1,000 to 2,000 USD. Besides cost issues, delivery delays also pose huge challenges to businesses.
Take advantage of opportunities
In the difficult context that is forecast to continue in 2024, Mr. Tran Quoc Manh noted that 2024 is the third year of the difficult period. Therefore, businesses must get used to and adapt to unpredictable fluctuations in the world economy and have flexible strategies to respond to those difficulties. For example, among new orders, the amount of sample goods accounts for a quite high proportion, but businesses must make persistent efforts. Because many buyers are currently looking for new suppliers, if done well, sample products can open up greater opportunities for businesses. In addition, in addition to objective difficulties, governments of countries such as the US and Europe also tighten environmental requirements for products. If businesses do not quickly transform from the factory to creating products that meet requirements, to marketing abroad, it will be very difficult to survive.
Meanwhile, Mr. Nguyen Quoc Anh said, that when there is a lack of empty orders, businesses have to collect small orders to fill the gap. Specifically, facing difficulties in China, many Vietnamese businesses have found several niche products and niche markets. Such as pipe products for oil and gas exploitation and mineral exploitation in the Netherlands. Businesses that find niche products and niche markets will have opportunities to develop in 2024.
Besides, the current loan interest rates of banks are very good, only about 6.5%/year for small and medium enterprises, even only 5% for more reputable enterprises. Therefore, businesses with potential and prospects for orders will find ways to borrow to buy raw materials. Because the price of raw materials for the plastic industry is currently quite cheap, for example, auxiliary materials for the rubber industry are decreasing by about 10% compared to the peak in 2023; Other additives and materials are also reduced by about 5 – 10%. However, businesses that do not have many orders and whose prospects are still uncertain will be more hesitant to borrow money to store raw materials.
To support businesses in finding orders, many large fairs have been promoted to connect domestic manufacturing businesses with international buyers. Typically, the 15th Vietnam International Fine Arts Furniture Export Fair (VIFA EXPO) was held from February 26 to 29 with more than 600 businesses registering nearly 2,000 booths on a total area of nearly 36,000 m2. There are more than 3,500 international visitors from 83 countries and territories registered to visit VIFA EXPO 2024. Next, in early March, the Ho Chi Minh City Furniture and Wooden Furniture Export Fair (HAWA EXPO) will also be held. The organization’s scale is also very large.
In the textile industry, from February 28 to March 2, the Vietnam International Exhibition of Textile Industry and Textile Technology 2024 (VIATT 2024) will also be held for the first time in Vietnam with over 400 participating enterprises.
By participating in trade promotion activities that are continuously organized on a large scale, businesses expect to find new orders, making up for the gap of orders that have been decreasing since the last time.