During market visits, many textile and garment companies were wondering why it has become so difficult to receive foreign trade orders.
I don’t know since when, the foreign trade orders of textile and garment companies have experienced varying degrees of decline. Due to difficulties in receiving orders, some companies are increasingly willing to suspend production during the holidays, trying to reduce costs by reducing operating rates. So where did the “lost” foreign trade orders go?
Growth slows down due to multiple factors
According to data from the General Administration of Customs, in U.S. dollars, in October 2022, textile and clothing exports were US$25.02 billion, a decrease of 13.6%, and a month-on-month decrease of 10.8%. Among them, textile exports were US$11.37 billion, a decrease of 9.1%, a month-on-month decrease of 5.8%, and clothing exports. US$13.65 billion, a decrease of 17% and a month-on-month decrease of 14.6%.
It can be seen from the data that due to factors such as inventory backlogs in major markets, declining demand, and reduced orders, the year-on-year and month-on-month declines in textile and clothing exports in October expanded. Among them, clothing exports dropped significantly, down 17% year-on-year.
A polyester taffeta weaving company said that as a weaving company, the probability of direct contact with foreign trade orders is not very high. Generally, traders receive orders and then hand them over to them for production and supply. Since this year, such orders from the company have basically “disappeared”. Compared to previous years, this situation is truly abnormal. I learned from traders that it is very difficult to receive foreign trade orders this year. There are not many orders on hand. Naturally, we cannot place orders with weaving companies, which is just a vicious cycle.
Another foreign trade company revealed that life is really difficult now. Not only have fewer customers placed orders, but even the amount of orders has continued to “shrink.” In previous years, customers who could place orders of 200,000-300,000 yards only placed 70,000 yards this year. . No, the fabric installed now was ordered by that customer. According to customer feedback, this batch of fabrics is mainly used to make spring and summer clothing. In the eyes of the company, the profit from this order, including fluctuations in exchange rates and shipping costs, is minimal. If there are any unexpected situations such as loss, suspension of sailings, or port accumulation during transportation, it might end up at a loss. It’s really difficult!
At present, the situation in the foreign trade market is not optimistic, and uncertain factors such as high risks, many changes, and great difficulties may break out at any time. Shrinking demand in the international market and intensifying competition will bring more severe challenges to my country’s textile and apparel exports.
Not to be underestimated, Southeast Asia is a strong opponent
Although the decrease in orders is caused by a combination of factors, looking at the long-term trend, the industry generally believes that this is a manifestation of the transfer of international orders to Southeast Asian countries.
According to preliminary statistics from Vietnam, from January to October 2022, Vietnam’s textile and clothing exports jointly created revenue of US$31.729 billion, achieving an astonishing growth of 21.6%. The Vietnam Textile and Apparel Association (VITAS) has set a target of US$43 billion in 2022 for its textile, clothing and yarn exports.
This data is really worrying, so why are orders flowing out of Southeast Asia? Taken together, part of the reason is that domestic companies took the initiative to avoid the risk of the epidemic, and part of the reason is due to the trade environment in Southeast Asia.
According to a senior foreign trade person, first of all, European, American and Southeast Asian countries have opened up face-to-face communication and can freely participate in exhibitions for negotiation. However, most communication between domestic companies and foreign customers is online, so Southeast Asia has more advantages in facilitating the completion of orders. Secondly, in terms of labor costs, as the domestic demographic dividend gradually disappears, products with low added value or low technological content will be produced in Southeast Asia where labor costs are lower, which will give enterprises greater profit margins. From this point of view, some textile and clothing orders The exodus is also reasonable. Finally, regular fluctuations in exchange rates cannot be ignored. Some customers anticipate a fall in the U.S. dollar and are afraid of suffering losses, so they will place orders in areas with relatively stable exchange rates to avoid such risks.
Therefore, as a labor-intensive industry, textile and clothing has a strong substitution effect in Southeast Asia, and its competitive strength cannot be underestimated.
Postscript:
Although the growth rate of textile and apparel exports has slowed down due to multiple factors, textile and apparel exports in the ASEAN and Japanese markets have maintained steady growth. In addition, RCEP member countries and some emerging markets have also performed well. The outflow of orders seems inevitable, and the improvement of the foreign trade situation does not happen overnight, but confidence is more precious than gold. Only by actively responding to the crisis can we usher in a turnaround!
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