Vietnam COVID19 and the furniture industry:
This post will lay out what the COVID19 situation is on the ground in Vietnam and how that applies to the Furniture industry. (Although all industries are obviously effected we are a Furniture Company)
Covid19 and Measures installed by Vietnam:
As of writing, there are 240 cases in Vietnam on April 4th 2020. On April 1st Vietnam declared the outbreak a national epidemic compared to other countries Vietnam is controlling the outbreak very effectively. Please see below link:
http://news.chinhphu.vn/Home/PM-officially-declares-COVID19-a-national-epidemic/20204/39495.vgp
Social distancing measures are in place in Vietnam along with all entertainment sectors closed with establishments of 30 seats or more affected by the order. This is currently in effect until April 15th. The link below explains more details.
US Dollar inflows and the Vietnam Supply Chain:
As we are all aware most business as slowed significantly around the world in both the supply and demand side. What does this mean how are we affected?
The problem is the lack of US$ flowing into Vietnam and other countries that have a strong export dependency. Factories are dealing with cancelled orders or requests to delay shipments.
Current cash flows are reduced causing a problem for factories, with no new orders coming in, raw materials and part-finished goods compound the problem. Some of our suppliers are requesting 100% payment upfront for raw materials. The situation on the ground is stressful in many areas.
Even if you are not affected by the government shut down you are affected by dollar cash flow issues and overhead costs. See the below link for further details.
We have orders in place but our customers are holding payments until the world sees a flattening of the infection curve.
The 3rd party counter risk is now elevated though we remain in a strong position due to high cash balances. Not oveexting expansion ambitions in good times as we know we must ride the bad times. Thankful of our conservative attitude positions us well so that we can support holding customers’ shipments.
US Dollar Strength:
One more point on the dollar inflows is US$ strength is hitting a 3 year high against a basket of world currencies.
This is problematic for the world, many countries hold large US$ debt. Serving that debt in their local currency becomes more expensive.
Suppliers in emerging markets need to be holding ample US$ dollar balance on their balance sheets, for raw material purchases, if suppliers have low dollars, they have to transfer from their lower value local currency to US$. You can see the world US$ dollar index here:
https://koyfin.com/s/Tu4xrrWIt9
While we are a furniture company and not a financial company, we need to be cognizant of the role of the US$ in exporting, keeping strong USD balances for such times. Let us all hope that Vietnam continues to do an excellent job of the COVID-19 containment measures.
As always you can contact us here for your Vietnam Furniture needs!