Price cuts fuel Vietnam’s apparel exports to the EU
Vietnam ranked as one of the top five apparel suppliers to the EU last year, helped by falling prices and curbs on shipments from China. According to a new report by Textiles Intelligence, Vietnam's EU exports are likely to grow in 2007 - but for 2008, the future looks much more uncertain.
The average price of EU clothing imports from Vietnam was slashed by 40% last year, according to a new report by Textiles Intelligence.
At the same time, the average price of clothing imports from all sources rose by 1.9%. As a result of these changes, Vietnamese clothing prices were less than half of those from other sources.
The drop in prices - from EUR11.29 per kg to EUR6.76 per kg - coincided with a colossal 147% increase in the volume of imports from Vietnam.
In fact, Vietnam became the EU's fifth biggest clothing supplier in volume last year - although in value terms it did not even rank among the top ten suppliers because its prices were so low.
The increase in supplies from Vietnam can be attributed largely to the introduction of safeguard quotas on Chinese products in mid-2005. The quotas - aimed at curbing growth in EU imports from China - were imposed on four categories of textile products and on six categories of clothing.
In the six clothing categories - T-shirts, brassieres, dresses, blouses, trousers and pullovers - growth in imports from Vietnam varied from 239% to 561%.
All of these rates were well above the 147% increase in total clothing imports from the country. At the same time, the average price of Vietnamese supplies dropped by more than 40%.
Vietnamese producers took advantage of the fact that Chinese producers were forced to reduce exports of the six categories because of quotas. In fact, China cut back its supplies of these products to the EU at rates varying from 30% to 51% last year.
In the case of T-shirts, imports from China fell in volume by 48%. Vietnamese producers, meanwhile, slashed their prices of these items by as much as 73% - to just EUR0.75 per piece - and stepped up their supplies to the EU by a massive 336%.
As a result, Vietnam became the EU's sixth largest supplier of T-shirts in terms of volume. In terms of value, however, it ranked only 17th.
Bras get a volume boost
Similarly, imports of brassieres from China fell in volume by 31% while supplies from Vietnam soared by 258%. In value, however, imports from Vietnam rose by only 16% as suppliers slashed their prices by 68%.
In the case of dresses, EU imports from Vietnam rose by a massive 561% in volume terms - albeit from a relatively low base - as suppliers cut their average price by 61%, from EUR4.23 per piece to EUR1.65 per piece.
At the same time, imports from China fell by 41% in volume and rose in price by 136%. In fact, China changed from being a low price supplier in 2005 - at EUR5.41 per piece - to being a high priced supplier in 2006, at EUR12.76 per piece.
This pattern was repeated in blouses. EU imports from Vietnam rose in volume terms by 251%, coinciding with a 30% drop in import volume from China. At the same time, Vietnamese prices were cut by 53%.
Meanwhile, imports of trousers from Vietnam rose in volume by 360% in a year which saw their average price fall by 52%.
Imports of pullovers from the country rose by 239% as their average price fell by 44%. Imports from China fell in both categories, by 48% and 51% respectively.
Growth potential in 2007
In 2007 it is expected that EU imports from Vietnam will continue to grow. That said, there is still room for growth in imports from China as Chinese exporters have failed to use all of their quota allocation.
Indeed, China could increase its supplies of T-shirts by 94% without exceeding its quota allocation for 2007. In the case of trousers, Chinese supplies could rise by 72%.
Uncertainties in 2008
For 2008 the future is uncertain.
EU imports from China are set for further substantial growth once quotas have been lifted at the end of 2007.
That said, growth will be tempered by the fact that the European and Chinese authorities will monitor shipments, leaving open the possibility that further quotas may be imposed until the end of 2008 in the event of surges.
In the meantime, retailers in Europe may prefer to maintain their contracts with Vietnamese suppliers - in order to avoid the risk of a repeat of the 'Bra Wars' fiasco of 2005 which left Chinese goods stranded at European ports.
'Trends in EU Textile and Clothing Imports' was published by in Issue No 130 (July-August 2007) of Textile Outlook International.
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