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Vietnamese manufacturers struggling to find alternative raw materials

Vietnamese manufacturers struggling to find alternative raw materials

Tuesday 25, 02 2020
China is the "world factory", an important link in global production and supply chains. COVID - 19 has caused production activities in China to slow down

Scarcity of raw materials

China is the "world factory", an important link in global production and supply chains. COVID - 19 has caused production activities in China to slow down, leading to a delay in the entire production chain. Textile is considered to be most negatively affected among the manufacturing industries because the majority of input materials are imported from China. Nguyen Huu Vinh, Head of Sales - Import & Export Department of March 29 Textile Garment Joint Stock Company said that the company imports 40-50% of raw materials from Chinese partners.

This company still has backup materials but this source of material can only maintain orders until the end of March Also having difficulties in raw material sources, Danameco Medical Joint Stock Corporation is in a worse situation when it is a provider of medical masks to stabilize prices but is facing the risk of not having raw materials for production. Danameco currently produces about 120,000 standard masks (3 layers) / day to provide masks for stabilizing prices program of the Ministry of Health and a number of other ministries. Da Nang City has ordered 1 million medical masks to stabilize prices to serve the needs of the people of the city (the price is 2,200 VND / item).

Mr. Vo Minh Duc - Business Director of this company said that the bacterial filter is the most important component of the medical mask but the company is currently looking for a supplier of the bacterial filter because the warehouse has been nearly exhausted. According to Mr. Duc, due to the effects of the COVID - 19, suppliers of raw materials of this company have not announced the date of shipment to Danameco, in the context that China is banning the export of medical masks as well as auxiliary materials for the production of medical masks. Therefore, Danameco is currently urgently seeking alternative sources of raw materials, but it is very difficult.

Difficult to find alternative source of raw materials

The COVID - 19 epidemic broke out in the second half of January 2020, but because this was the time of the Lunar New Year and this epidemic is also beyond the WHO's forecast, although businesses have been proactive in contingency plans, finding alternative sources of materials, it is not easy. The biggest difficulty of alternative materials is quality standards. China is the world's factory. Chinese material suppliers are professionalized and specialized, and are a link of global supply chains.

These units ensure the production of standard materials on demand with the lowest cost. This is very difficult to find in other countries, including Vietnam. Mr. Nguyen Huu Vinh said his company is asking purchasing staff to resort to raw materials from Vietnam and ASEAN.

“However, there will be quite a lot of barriers to this activity as the cost of raw materials will be higher while these domestic suppliers may not be able to meet the quantity supply requirements as well as quality standards as suppliers from China. Our purchasing staff are familiar with and trust suppliers in China without paying attention to the source of raw materials in Vietnam” said Mr. Vinh. Despite being optimistic that it is possible to find alternative sources of raw materials in the domestic market, Mr. Mac Van Khoa - Director of Adoor Vietnam Co., Ltd. also thinks that the quality and standards of raw materials are what he is most worried about.

“If the price of input is high, the finished products will be a bit higher. I believe customers can sympathize. However, my biggest concern is the standards and quality of materials provided by domestic suppliers” Mr. Khoa shared. Mr. Vo Minh Duc said that there are very few businesses supplying input materials of medical masks in Vietnam and ASEAN. "The problem is whether to find a supplier or not, and whether the material meets the quality standard or not" Mr. Duc said, adding that his company has also updated the information that the Ministry of Finance has a policy of import tax exemption on raw materials for manufacturing medical masks, and is making efforts to find raw material suppliers. “Our company is currently negotiating with several suppliers of membrane filters, but we have not reached the final result.

We hope the negotiations will have positive results and my company will take advantage of this tax-free concession” Mr. Duc shared. Mr. Duc said that his company not only has difficulty in raw materials, but also with export orders. “There are partners doing business with us for many years, but due to the epidemic, the Ministry of Health has proposed that mask production should only be for the domestic market and we also agree. This also means "being untrustworthy" to our partners" Mr. Duc pondered and said that this difficulty of his company has partly been resolved.

Vietnamese manufacturers struggling to find alternative raw materials

Opportunities to promote advantages in the domestic market

Despite many difficulties, manufacturers also believe that there is a blessing in disguise. The COVID - 19 epidemic is also an opportunity for domestic raw material suppliers to promote their advantages. “COVID - 19 is an opportunity for purchasers to change suppliers, becoming not too dependent on the Chinese market. Although this has to be agreed by customers, it is also a chance for Vietnamese suppliers to be more professional and better” Mr. Nguyen Huu Vinh said.

​Agreeing with this view, Mr. Vo Minh Duc also said that this is an opportunity for the manufacturing industry of raw materials in general and medical masks in particular to transform. “Epidemics do not happen only once. In the long run, the authorities need to have a master plan for the area of mask material production in the country, both to serve the needs of mask manufacturing enterprises and be more proactive in the event of incidents such as COVID - 19”, Mr. Duc proposed.

​>>  The Vietnamese manufacturing sector will continue to develop positively in 2020


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