​Golden time for apparel sector to go green

The shift towards green textile and garment production chains is necessary for local firms to achieve sustainable development goals and counter the gradual loss of Vietnam’s cost advantage. It is a golden time for the sector to switch to sustainability, experts say.

Vietnam’s textile and garment industry will continue to face difficulties in the coming months due to the decreasing orders from markets like the United States and European Union, according to the Vietnam Textile and Apparel Association (Vitas).

Statistics from Vitas showed that in the first half of the year, the industry’s export turnover was estimated at US$18.6bil (RM84bil), down 17.6% over the same period last year. Meanwhile, the import turnover also reduced by 20.5% to US$10.7bil in the first six months of the year.

Vitas forecasts that production and export of textiles and garments will gradually improve, but difficulties will continue until the end of 2023 as many businesses have not yet had enough orders for the third and fourth quarters.As such, the garment and textile sector set an export turnover target of US$40bil this year.

According to information from the Mercantile Exchange of Vietnam, since the end of 2022 cotton prices have been quite stable, mainly struggling within a small range of US$1,800 to US$1,900 per tonne.

The cotton prices traded on the Intercontinental Exchange as of July 18 at US$1,847 per tonne was down nearly 1.5 times from the price of US$2,700 per tonne recorded last August.

Cotton prices are stable at low levels stemming from both supply and demand of the market. On the supply side, cotton production gradually recovered after the effects of drought in the main cotton-growing region of the United States in mid-2022.

Meanwhile, the recovery in demand for cotton was lower than expected due to global economic headwinds.In particular, China, the world’s largest cotton importer, is still showing a slow recovery after removing its zero-Covid policy, making cotton imports less positive.

Pham Quang Anh, director of the Vietnam Commodity News Centre said that the world economy still faced many challenges, especially the slow recovery of China which has continued to be a major obstacle to increasing demand for cotton products.

Therefore, cotton prices could maintain a pullback trend in the near future.

Stable cotton prices are a good thing for big cotton importing countries like Vietnam. But the problem is that the price dropped sharply and showed no signs of recovery, making local textile and garment enterprises that had purchased goods before not able to react.The price difference makes the cost of producing textiles and garments in the country high compared to elsewhere which is not heavily dependent on input materials, hindering Vietnamese firms in receiving orders.Cao Huu Hieu, general director of Vietnam National Textile and Garment Group said difficulties have been seen from the third quarter of 2022 due to low consumer demand, the deeply dropped price because of decreasing cotton prices – the main raw material of the yarn industry.

When China officially reopened, the domestic yarn industry also found it difficult to compete on price.

Therefore, the entire yarn industry suffered losses and production inventories were high.