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IKEA, Adidas, seek recovery in Vietnam as new outbreak looms

Ags - Fruit/Veg 126 Cons. Discr. - Retailing 414 Consumer Staples 735 Coronavirus 507 Info Tech - Tech Hardware 736 U.S. 5203 Vietnam 343

The Vietnamese army has escalated lockdowns and movement restrictions to fight against the outbreak of COVID-19 in the country, Reuters reports. These outbreaks threaten to disrupt the lives of the Vietnamese population, the local economy, as well as manufacturers who focus on exports. 

Disruptions may come at the wrong time for companies importing goods for the holiday season, which need to be manufactured well in advance of October, traditionally the highest month of U.S. imports as discussed in Panjiva research of Aug 24.

The top import category to the U.S. from Vietnam in the first half of the year was electronics, making up 31.4% of the total by value. These imports increased by 50.3% year over year Q2, showing a sustained increase that matches the demand for these products.

Apparel and furniture imports each made up 14.2% of the total in the first half, but saw very different trends. The two categories increased by 44.3% and 103.7% year over year respectively, but when compared to 2019, apparel only increased by 8.3%. This was also seen in imports of footwear which grew 46.2% year over year but only by 17.2% when compared to 2019. Imports of furniture remained high,  increasing by 123.4% against 2019. This may indicate that higher margin products like electronics and furniture were able to attract more labor in a limited pool, or that those products were able to outbid competitors to make it through congested ports.

Electrics light up Vietnam exports to U.S. 

Chart shows imports to the U.S. from Vietnam by product. Source: Panjiva

Delays in the production or shipping or products from Vietnam could impact importers from those same sectors including Samsung, IKEA, and Adidas. These companies all saw increased imports in the second quarter, up 38.9%, 184.4%, and 51.4% year over year. Compared against 2019, Samsung saw further import growth of 50.9% while Ikea and Adidas’ growth softened to 7.0% and 30.8% respectively.

Dole and Chiquita, importers of bananas, could also be affected. Imports associated with the two fruit companies fell by 3.5% and 6.8% year over year in Q2 while recent data from july shows Dole continuing to fall, down 0.9%. Chiquita’s July imports were better, up 8.5% year over year, but this was still 7.1% lower than the same month in 2019.

There also may be knock on effects for automotive supply chains with Sumitomo, a provider of tires, saw imports from Vietnam increase by 30.4% year over year in Q2, and 29.3% in July. This is tempered adjusting for the pandemic, but compared to 2019 Q2 increased by 14.9% and July increased by 10.4%. These numbers may reflect increased reliance on sources in Vietnam that may be impacted by pandemic-related restrictions in the country.

Companies pushing back to pre-COVID levels in Vietnam

Chart shows U.S. imports from Vietnam by company. Source: Panjiva

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