Vietnam is experiencing the most serious wave of COVID-19 epidemic, and Ho Chi Minh City, the largest city and economic and trade center in the country, has become the "hardest hit". Since the 23rd, the strictest "do not move on the spot" prevention and control measures have been implemented.
It is required to implement martial law in the whole city from August 23rd to September 6th, and all citizens are not allowed to go out except 31 special groups allowed by regulations. Food distribution for nearly 10 million people will be taken over by the army, police and the government's epidemic prevention and control team.
Previously, 19 cities including Ho Chi Minh City were "blocked", which has caused serious damage to Vietnam's economic production and supply chain. The upgraded prevention and control measures are expected to have a more serious impact on factory production and cargo transportation.
SEKO Logistics said that less than 30% of factories in Vietnam maintain a complete production plan.
According to Vietnam Textile and Apparel Association, nearly 90% of industrial supply chains have been seriously affected by the blockade, and as many as 80% of garment and textile enterprises in southern provinces have completely stopped production. In the north, about 20% to 30% of textile and clothing suppliers have stopped production.
Similarly, the Korean Chamber of Commerce in Ho Chi Minh City estimates that 27% of its member enterprises have stopped production, while the Vietnam Seafood Exporters and Manufacturers Association says that only 30% of seafood enterprises in the southern region are still operating.
The problem faced by many retailers is that Vietnam is the source of a large number of winter coats, which can hardly be replaced by products from other countries like T-shirts.
At present, more and more large clothing and footwear retailers are trying to shift from sea to air to make up for the sharp slowdown in production caused by the COVID-19 outbreak in Vietnam and ensure that seasonal imports can reach consumers on time during the holiday season.
Mode switching has always been one of the strategies for importers to reduce risks and deal with supply chain interruption, especially for importers outside China. Shipping companies do not have enough ships and equipment to meet the record demand in North America. For some companies operating in Vietnam, it is increasingly necessary to replace shipping by air.
The COVID-19 outbreak has also reduced Vietnam's air cargo capacity. Social isolation measures and shortened working hours have slowed down the working speed at Ho Chi Minh Airport. Due to the extremely low travel demand, there are few passenger flights that can provide extra freight capacity. Meanwhile, Rosen said that additional air transportation is not feasible because the authorities have suspended the granting of landing rights for temporary charter flights.
The logistics company in charge of freight transportation said that due to the surge in demand for all-cargo charter capacity, the country's air freight rate is rising rapidly.
At the beginning of the peak season in August, the price of air transportation usually hovered around US$ 4 per kilogram, but now it has more than doubled to between US$ 8.5 and US$ 10 per kilogram. Rosen predicted that the spot market price will soon reach USD 15-18 per kilogram (this peak only appeared at the beginning of the epidemic, when passengers traveled less and the government arranged emergency freight flights to transport protective medical equipment).
In addition, Vietnamese ports are still facing congestion. Due to strict prevention and control measures, the number of port workers has been reduced by half. At the same time, because truck drivers need to provide negative results of nucleic acid test within three days, the local truck traffic has dropped by 60%, and the cargo backlog in the dock yard is serious. The "do not move on the spot" prevention and control measures implemented from today are expected to further aggravate the supply chain bottleneck in Vietnam.
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