Vietnam. Cotton and Products Annual. Apr 2014 April 11, 2014
Vietnam cotton production is small, meeting less than one percent of total cotton demand. Vietnam relies heavily on cotton imports to feed its growing textile and spinning industry. Post maintains Vietnam's 2013/2014 cotton production estimate at 3,250 metric tons (mt) or 14.9 thousand bales. Cotton imports in Marketing Year (MY) 2013/2014 are revised to increase by 20 percent, reaching 633,000 mt (or 2,900 thousand bales), due mainly to strong exports of yarn and expansion of the yarn spinning sector. In CY 2013, Vietnam imported 581,000 mt of cotton (or 2,665 thousand bales), a year-on-year increase of 39 percent. U.S. cotton accounted for 37 percent of total imports. Vietnam’s cotton production and trade for the next MY (2014/2015) is projected to increase by 13 percent in comparison with MY 2013/2014 due to cotton farming projects by the leading Vietnam Textile Corporation (VINATEX). MY 2014/2015 cotton imports are projected to decrease slightly due to the projection of lower Chinese imports of Vietnamese yarns.
SITUATION AND OUTLOOK
Vietnam is now ranked among the world’s top five textile, garment, and apparel-exporting countries. Despite the global economic downturn, Vietnam exports of textile, garment, and apparel products continued growing in 2013, reaching a value of $17.9 billion -- an increase of 18.9 percent over the same period of 2012 (Source: Vietnam Customs Office).
Vietnam has set ambitious targets for the textile industry, with exports targeted by the Vietnam Ministry of Industry and Trade to reach $25 billion by 2020. The Trans-Pacific Partnership Agreement (TPP), if finalized, would help Vietnam achieve this target. The United States remains the largest market for Vietnam’s textile industry, and accounted for nearly 50 percent of total sector exports in 2013.
Vietnam is one of a very few countries in Asia that have expanded their yarn spinning sector in recent years. From only 2 million spindles in 2000, Vietnam’s spindle capacity reached about 6 million spindles (equivalent) in 2013, creating the situation for voracious demand for imported cotton. Due to strong demand for yarns from international markets, especially China, Vietnam exports of yarn in 2013 continued growing, and reached 450,000 metric tons -- a year-on-year increase of 8.4 percent. Vietnam exports nearly 65 percent of the yarn (including cotton yarn) that it produces. Main export markets for Vietnamese cotton yarn are China, South Korea, Turkey, and Indonesia.
Post maintains the forecast for MY 2013/14 cotton lint production at 14.9 thousand bales due to low cotton prices and strong competition from other agricultural crops (i.e. cassava and corn). Recently Vinatex has committed to invest more in cotton farming, especially in the South Central Coast of Vietnam. As such, cotton production in MY 2014/2015 is forecast to increase by 14 percent over the previous crop. Vietnam will continue to rely heavily on cotton imports to fulfill its cotton needs.
Post revises MY 2013/14 cotton imports to 633,000 mt or 2,900 thousand bales, an increase of 20 percent over MY 2012/13. This growth is attributed to the expanding cotton spinning sector and continued strong exports of Vietnamese cotton yarns to overseas markets, especially China and South Korea. In CY 2013, China continued to be the biggest buyer of Vietnamese yarns (mainly low-count cotton yarns) with imports reaching 258,000 mt -- an increase of over 31 percent over 2012.
In CY 2013, Vietnam imported 581,000 mt of cotton, a y-o-y increase of 39 percent, thanks to strong demand for cotton yarns in international markets, especially China. For the seventh consecutive year, the United States remains the largest supplier of cotton to Vietnam. Vietnam sourced 214,700 tons (about 37 percent) of its total cotton imports in 2013 from the United States, making it the 4rd largest market for U.S. cotton at a value of $401 million.
Vietnam’s Cotton Production in 2013/2014 and 2014/2015
Post maintains the forecast for MY 2013/14 cotton lint production at about 14.9 thousand bales, a 12 percent decline compared to the previous year as low cotton prices and strong competition from other agricultural crops (i.e. cassava and corn) resulted in a reduction of planted area.
It is still somewhat early to provide a forecast for the next Marketing Year (August 2014- July 2015). However, Vietnam cotton production for MY 2014/15 is forecast to increase to 17 thousand bales, up 13 percent over the 2013/2014 crop due mainly to increased investment by Vinatex in cotton farming projects in the South Central Coast of Vietnam. Vietnam will continue to rely heavily on cotton imports to fulfill its cotton needs.
As a result of strong demand for cotton yarns from international markets, especially China, Vietnam cotton imports in calendar year 2013 saw a significant increase -- 39 percent over 2012. 2013 imports reached a record of 581,000 mt for a value of $1.17 billion.
Vietnam Imports of Cotton by Calendar Year and Vietnam’s Primary Cotton Suppliers:
In 2013, Vietnam imported about 581,000 tons of cotton, a year-on-year increase of 39 percent. The United States remains the number one cotton supplier to Vietnam, with more than a 37 percent share of Vietnam’s total cotton imports (note: this marks the seventh consecutive year that the U.S. is the leading supplier of cotton to Vietnam). India ranked second and Australia was the third largest supplier. Other major suppliers include Brazil, Pakistan, and African countries.
In MY 2012/2013, Vietnam imported a record of 525,000 tons (or 2,408 thousand bales) of cotton, valued at $1.03 billion, a sharp increase of more than 48 percent in quantity and 18.7 percent in value over the previous year.
For the first 8 months of MY 2013/2014, Vietnam imported 418,900 tons of cotton for a value of $845 million, an increase of 23.6 percent in quantity and 30 percent in value over the same period of the previous year. Given this strong increasing trend, Post revises Vietnam cotton imports in MY 2013/2014 to 633,000 tons (or 2,900 thousand bales). The expanding cotton spinning sector and strong exports of yarn in 2014 bolster this trend of increased imports.
It is still early to provide a forecast for Vietnam’s cotton imports for the next marketing year (2014/2015). China’s imports of yarns are forecast lower as policy changes are expected to reduce their state reserve stocks of cotton. Vietnam’s cotton imports in 2014/15 are forecast to decrease slightly by 6 percent to a level of 590,000 tons (or 2,700 thousand bales).
U.S. Cotton Exports to Vietnam
In 2013, U.S. cotton exports to Vietnam totaled 214,700 tons for a value of $401 million, a year-on-year increase of 70 percent in quantity and 62 percent in value.
U.S. cotton exports to Vietnam during August 2012-July 2013 reached nearly 195,000 tons (or 893 thousand bales) at a value of $350 million, a sharp year-on-year increase of 72 percent in quantity and 41 percent in value. U.S. cotton made up 37.5 percent of the total cotton imports in MY 2012/2013 (in quantity).
According to the U.S. Census Bureau, U.S. cotton exports to Vietnam in the first six month of MY 2013/14 (August 2013-Janurary 2014) showed an increase of 38 percent in value and 22 percent in quantity in comparison with the same period of 2012/13. Post projects that U.S. cotton exports to Vietnam in MY 2013/14 will likely reach a new record.
Vietnam’s domestic cotton consumption continues to increase in order to meet strong demand from its expanding textile industry. Demand for yarns is strong, both for export and domestic markets. Vietnam is one of a very few countries in Asia that have expanded their yarn spinning sector in recent years.
Vietnam is currently home to over 100 spinning mills with 6 million spindles (equivalent) for a total capacity of 720,000 tons of cotton-based yarns. Vietnam’s cotton consumption has been increasing at an average rate of 8 percent, per year, for the last five years.
Post revises estimated domestic cotton consumption for 2013/2014 to 610,000 tons, equivalent to 2,800 thousand bales (note: Post’s previous estimate was 2,530 thousand bales). This revision reflects the stronger exports of cotton yarn to overseas markets, especially China.
For 2014/2015, China’s imports of yarns are forecast lower as policy changes are expected to reduce their state reserve stocks of cotton. As such, Post forecasts that Vietnam cotton consumption for 2014/2015 will reduce by 5 percent reaching 578,000 tons or 2,650 thousand bales.
As cotton prices and bank interest rates have gradually softened in recent months of MY 2013-2014, cotton users and traders are able to take on a larger inventory , creating a slight increase in stocks-to-use ratio (from 22 percent to 23 percent).
There were stable monthly cotton import prices in 2013. These prices (USD per kg) ranged from 1.86 to 2.09. The average import price for 2013 was $2.02/kg, a slight decrease of 3.3 percent in comparison to the average import price in 2012.
Presently, seed cotton has been purchased at an average price of VND 13,000/kg, equivalent to $0.616/kg, an increase of 7 percent over the previous crop (note: in the previous crop, seed cotton was bought at $0.576/kg). Ginned cotton is being sold at $1.97-2.0/kg.
CONSUMPTION OF VALUE-ADDED COTTON PRODUCTS
It is estimated that Vietnam produced 720,000 mt of yarns in 2013, an increase of 6 percent over 2012. It is quite difficult to determine the exact breakdown of yarns made from cotton in the total production due to the complexity of cotton content in cotton-polyester blended yarns.
Vietnam exports nearly 65 percent of its yarn production. From its total production of 720,000 mt of cotton-fiber yarns in 2013, Vietnam exported nearly 450,000 mt of yarns. The yarns staying in the domestic market accounted for 35 percent, or 270,000 mt. The main markets for Vietnamese yarns are: China (258,000 mt or 57 percent of its total exports); Korea (35,000 mt or 8 percent), and Turkey (18,000 mt or 4 percent).
According to the World Trade Atlas, in CY 2013, Vietnam exported about $1.15 billion of cotton yarns (Harmonized System Code 5205 and 5206) to overseas markets. As mentioned above, China, Korea, Turkey, and Indonesia were the four biggest importers accounting for over 94 percent of the total export value.
Although Vietnam is a sizable exporter of yarns (mainly cotton yarns), Vietnam also imports yarns for domestic use. However, there is no official data on Vietnam imports of cotton yarns. According to Vietnam Cotton Spinning Association, most of the yarns imported into Vietnam are synthetic fiber yarns.
According to World Trade Atlas, in 2013, Vietnam imported over $1.3 billion of yarns from other countries, of which synthetic filament yarn and artificial fiber yarns took nearly 70 percent of the total imports.
Vietnam imports of fabric:
With its current limited dyeing capacity, Vietnam is only able to produce about 1.0 to1.3 billion square meters of fabric. However, the textile industry needs over 6.8 billion square meters of fabric. To feed its growing apparel sector (for exports), Vietnam has to rely heavily on imported fabrics.
According to the Vietnam Textile and Apparel Association and the Vietnam Customs Department, in 2013 Vietnam spent over $8 billion to import more than 6 billion square meters of fabric, mainly from China. According to World Trade Atlas, China exported over $5.7 billion of fabric to Vietnam.
Tariff on Cotton
Cotton lint (HS code 5201 and 5203) has a zero tariff but a 5 percent value added tax is assessed.
Tariff on cotton yarn
Cotton yarn (HS code 5205-5206-5207) has a 5 percent tariff and a 10 percent value added tax.
Biotech Policy and Cotton Production
Commercialization of biotech cotton is not yet approved in Vietnam. Although confined field trails for biotech cotton are authorized, to date, field trials have not been conducted