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:
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, this causes stress on the supply side as factories are dealing with cancelled orders or requests to delay shipments. Current cash flows are reduced causing a problem for factories, which is further doubled down on, 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, so the situation on the ground is stress 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 as long as they can until the world sees a flattening of the infection curve and everybody can go back to work. The 3rd party counter risk are now elevated though we remain in a strong position as we always hold high cash balances and do not overextend our expansion ambitions in good times as we know we must ride the bad times and this one such time were we are thankful of our conservative attitude positions us well that we can support holding customers shipments our suppliers and employees take advantage of the restart and get back to work in short order.
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 as many countries hold large US$ debt, therefore, serving that debt in their local currency becomes more expensive. Why are we telling you such a large macro point? Suppliers in emerging markets need to be holding ample US$ dollar balance on their balance sheets allowing them to take advantage of the dollars buying power for raw materials if they are not they have to transfer from their lower value local currency to US$ reducing their profits further. You can see the world US$ dollar index here:
While we are a furniture company and not a financial company we are cognizant of the US$ very important role is exporting, thus we keep strong balances for these such times. Let us all hope that Vietnam continues to do an excellent job of the COVID19 containment measures and the rest of the world gets back to work soon.
As always you can contact us here for your Vietnam Furniture needs!