Textile, Rubber Industry: Anxious about Material Supply

Both the textile and rubber processing industries in Vietnam are facing difficulties due to raw material prices and scarcity.

The natural rubber latex price has increased dramatically in 2010, so far reaching the all-time high of 67.5 million per ton. This is a serious difficulty for the rubber processing industry.

Rubber industry: Rising input price and concern for market share Le Van Tri, Deputy General Director of Casumina said, in the first quarter this year, the price of natural rubber latex has been increasing monthly, it has doubled since September last year and is up some 300 percent since a year ago.

From early this year, major rubber producers such as Thailand, Malaysia, Indonesia, India, Vietnam and China have faced droughts and have had to move the rubber tapping season to May and June, leading to a scarcity of natural rubber.

Rubber processing industry businesses may be unable to cope with continuously increasing prices. Mr. Ha Phuoc Loc, Deputy General Director of Da Nang rubber joint-stock company, said the company needs about 13,000 tons of rubber materials in 2010 to produce tires and other products. Due to the price increase, however, the company has only purchased 4,000 tons of Vietnam Rubber Industry Group (VRG), the rest must be collected from outside. According to Mr. Loc, the price of rubber latex rising 300 percent since the same period in 2009 has left enterprises facing many difficulties. “Currently, we are balancing production between unsold goods and new ones, therefore the increase pressure is not so big, but if by May the rubber latex price is still not down, the company will have to adjust our prices,” he added.

Meanwhile, representatives of Casumina company and Sao Vang company projected that they could hold out until the end of April, but if supply remains scarce and prices stay as high as they are currently in May, they will have to raise product price to reflect the input material price. “In September 2009, seeing a move up in latex, Casumina bought 5,000 tons for reserves.

Averaging material prices between the new and old, at the end of April we can calculate the latex price at 54,000 dong/kilo, which is bearable. However, if the situation doesn’t ease by May we have no other choice,” said Mr. Tri.

“Whichever company raises prices first will undoubtedly lose market share, but those who wait will bear higher losses,” said Mr. Le Van Tri.

Textile Industry skimps on raw materials

Nguyen Duc Khiem, Chairman of the board and CEO of Viet Thang Garment and Textile Company, said: “The best prices today are of viscose fibre, but from the beginning of the year to the present they increased about 10 percent monthly from US$ 2.2/kilo to US$ 2.7/kilo currently, followed by cotton from US$ 1.3 to 1.6/kilo…But price increases are not as worrying as when foreign companies delay delivery, creating a raw material shortage.”

Mrs. Phuong Dung, running a small business specializing in yarn and fibre near Ba Hoa market (Tan Binh) said: “This month, the supply meets only 50 percent of demand from households and weaving factories in Bay Hien region. Facing high yarn prices, weavers still buy but cannot find the sources to sell fibre.”

A CEO of a company located in Thu Duc with closed production from cotton fibre to fibre, weaving, dyeing, and printing said: “Export prices are higher, making many companies slow sales to local businesses, because companies know each other and sometimes give late payment. Operating under market mechanisms, there are no regulations forcing domestic fibre businesses to supply yarn for textile enterprises.”

According to Mr. Khiem, to maintain production, fibre enterprises have shared out materials with each other. The common situation in the industry is that units are skimping on input materials, ordering for purchase little by little because they cannot predict if the price will rise or fall.

In mid-April 2010, India banned exports of cotton fibre to protect the country’s garment industry, which has concerned many Vietnam textile enterprises, because Viet Nam is still dependent on imported cotton. Meanwhile, China is buying ever more materials from world markets, including from Vietnam. Some members of Vietnam Textile and Garment Association (Vitas) said that if this situation continues, some companies producing yarn and fibre will probably have to cut their production to 3-4 days/week.

Tags: Vietnam rubber industry, Vietnam texttile industry