Raw material price rises, shoe factory order reduces cost to rise!

Multiple Taiwanese media reports:

Covid-19 has hit the global economy hard, and shoe factory orders have declined.

Nanbao (4766) shoe glue shipment decline too much, impact the second quarter operating performance.

Nanbao believes one of may and June will be the bottom, and revenue is expected to pick up in July. He expects the operation to pick up in the third quarter compared with the second, with a clearer outlook for the fourth quarter.

Nanbao is a special chemical manufacturer, with the revenue of shoe rubber accounting for 40-45%. Its customers are among the top 10 global sneaker brands such as NIKE and Adidas. Textile glue, eisai glue, paper products processing, leather, etc., accounting for 35~ 30% of the revenue; Building materials with glue, paint business, revenue accounted for 15~ 10%.

Nanbao said that although eisai glue shipments have improved, but the shoe glue decline is too sharp, the second quarter of operations will be lower than the first quarter. Operations will pick up in the third quarter compared with the second, but the outlook for the fourth quarter will be clearer as expectations remain lower than in the first quarter.

In an effort to stem the tide of job cuts, the Cambodian Garment industry Chamber of Commerce said Thursday it is proposing that the government suspend the minimum wage of $190 a month for the garment industry to allow more flexibility for factories that do not have new orders. The garment and shoe industries are important pillars of Cambodia’s economy, providing 800,000 jobs.
Ministry of Commerce of China:
Order reduction, supply chain disruption trade costs rise

On June 15, the Comprehensive Department of The Ministry of Commerce and the Academy of International Trade and Economic Cooperation jointly released China’s Foreign Trade Situation Report (Spring 2020).

According to the report, the impact of the epidemic on global economy and trade is mainly reflected in four aspects:
First, export orders fell. The demand in the international market has shrunk seriously, and foreign trade enterprises are generally facing problems such as cancellations or delays of orders in hand, difficulties in signing new orders, etc. Small and medium-sized foreign trade enterprises are more affected.
Second, industrial and supply chains are blocked. Production in major economies has been suspended in large areas, and the upstream supply chain of Chinese enterprises has been blocked or fractured.
Third, trade costs are rising. Many countries have taken measures to restrict the flow of people, logistics and trade, which have greatly affected the smooth flow of international logistics such as sea and air transportation.
Fourth, enterprise capital chain pressure. A large number of overseas customers delay orders, compress orders or even cancel orders, causing the risk of default to rise rapidly and the risk of foreign exchange collection to increase due to the prolonged payment days foreign trade payment.
“In the months and years to come, open trade will be crucial to countries’ cooperation in fighting the pandemic, balancing global supply and demand, and promoting long-term economic growth,” said Wang Huiyao, director of the Think tank on Globalization.
Raw material prices soar
That suggests the global economy is rebounding

Yesterday (June 23), Reuters reported that:

Raw material prices, including oil and copper, are rising as global business activity restarts, a sign to many investors that the global economy is growing faster than expected.

Commodity prices fell earlier this year as a result of the epidemic lockdown, and the recent gains have been a boon for hard-hit producers such as copper miner Freeport-McMoran Inc. and energy giant Exxon Mobil Corp., many of which have cut supplies in response to the industry turmoil.

Investors are watching commodity prices closely because they fluctuate based on real-time shifts in global manufacturing supply, demand and momentum.

That means commodity prices tend to rise when factories are busy, ships full of goods are sailing around the world and consumers are traveling. Recent data show a surge in retail sales and U.S. employment last month, despite the epidemic’s record-high unemployment rate. Manufacturing activity in China also rose.

Post time: Jul-22-2020
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