Lack of containers disrupts Vietnam’s supply chain

PMI Vietnam Manufacturing Industry

January PMI was over 50 points but lower than December 2020 as business conditions improved at a slow pace, partly due to supply chain disruptions.

The Purchasing Managers’ Index (PMI) of Vietnam’s manufacturing sector reached 51.3 points in January, down from 51.7 in December. According to IHS Markit, despite the conditions Business has improved at the beginning of this year, growth is still weaker than the end of last year. Output, employment and purchases remained largely unchanged in January, while new orders grew more slowly.

PMI in January 2021 is over 50 points but lower than December 2020.  Photo: IHS Markit.

PMI in January 2021 is over 50 points but lower than December 2020. Photo: IHS Markit.

According to the analyst group, production scale was stable in January. However, input buying activities were affected by supply chain disruptions.

In fact, the degree of prolongation in delivery times recently was the largest in nearly a decade, except for the tough quarantine period last March and April. The companies said it was due to a shortage of shipping containers and a shortage of raw materials.

“Vietnam’s manufacturing sector struggled to regain growth in early 2021 when the effects of Covid-19 and supply chain disruptions hampered production,” commented IHS Markit. .

Problems related to shipping and material supply also add to inflationary pressure. Input costs rose for the fifth consecutive month and the fastest since June 2018. Output prices also increased, albeit at a modest rate and much weaker than input costs. Because companies want to prevent the escalation of raw material prices, companies have increased inventory to buy.

The number of new orders continued to increase, thereby extending the increase period to five months. However, the growth rate has slowed down compared to December. Meanwhile, the number of new export orders has barely changed, with a decline in markets where the number of Covid-19 infections increased.

“While the Vietnamese economy remains one of the fastest growing globally, there are significant difficulties that at least in the near future could hamper the ability to grow as spectacularly as possible. before the pandemic, “Andrew Harker, Economic Director at IHS Markit, commented.