What Are The Implications Of The Significant Decrease In Vietnamese Cotton Imports

What Are The Implications Of The Significant Decrease In Vietnamese Cotton Imports
According to statistics, in February 2023, Vietnam imported 77000 tons of cotton (lower than the average import volume in the past five years), a year-on-year decrease of 35.4%, of which foreign direct investment textile enterprises accounted for 74% of the total import volume of that month (the cumulative import volume in 2022/23 was 796000 tons, a year-on-year decrease of 12.0%).

After a year-on-year decrease of 45.2% and a month-on-month decrease of 30.5% in Vietnam’s cotton imports in January 2023, Vietnam’s cotton imports fell sharply again year-on-year, with a significant increase compared to the previous months of this year. The import volume and proportion of American cotton, Brazilian cotton, African cotton, and Australian cotton are among the top. In recent years, the export volume of Indian cotton to the Vietnamese market has declined significantly, with signs of gradual withdrawal.

Why has Vietnam’s cotton import volume plummeted year-on-year in recent months? The author’s judgment is directly related to the following factors:

One is that due to the impact of countries such as China and the European Union, which have successively upgraded their prohibitions on cotton imports in Xinjiang, Vietnam’s textile and clothing exports, which are highly related to Chinese cotton yarn, grey fabric, fabrics, clothing, etc., have also been greatly suppressed, and cotton consumption demand has shown a decline.

Second, due to the impact of interest rate hikes by the Federal Reserve and the European Central Bank and high inflation, the prosperity of cotton textile and clothing consumption in developed countries such as Europe and the United States has fluctuated and declined. For example, in January 2023, Vietnam’s total exports of textiles and clothing to the United States were US $991 million (accounting for the main share (about 44.04%), while its exports to Japan and South Korea were US $248 million and US $244 million, respectively, showing a significant decrease compared to the same period in 202.

Since the fourth quarter of 2022, as the cotton textile and clothing industries in Bangladesh, India, Pakistan, Indonesia, and other countries have bottomed out and rebounded, the startup rate has rebounded, and competition with Vietnamese textile and clothing enterprises has become increasingly fierce, with frequent order losses.

Fourth, against the backdrop of the devaluation of most national currencies against the US dollar, the Central Bank of Vietnam has bucked the global trend by expanding the daily trading range of the US dollar/Vietnamese dong from 3% to 5% of the middle price on October 17, 2022, which is not conducive to Vietnam’s cotton textile and clothing exports. In 2022, although the exchange rate of the Vietnamese dong against the US dollar has fallen by about 6.4%, it is still one of the Asian currencies with the smallest decline.

According to statistics, in January 2023, Vietnam’s textile and clothing exports amounted to 2.25 billion US dollars, a year-on-year decrease of 37.6%; The export value of yarn was US $225 million, a year-on-year decrease of 52.4%. It can be seen that the significant year-on-year decline in Vietnam’s cotton imports in January and February 2022 did not exceed expectations, but was a normal reflection of enterprise demand and market conditions.