What are the prospects for sectors amid COVID-19?

The near-term outlook of the oil and gas sectors would attach closely to the economic reopening

The near-term outlook for oil & gas

Under the broad-scaled lockdown, plummeting demand for petroleum products pressured production activities. Dung Quat Oil Refinery- one of the largest oil refineries, said it has to reduce production capacity under a threat of temporary shutdown if petroleum demand remains subdued. As a result, petroleum output saw the biggest slump in nearly two years since November 2019, down 27.1% MoM. 

Furthermore, natural gas production also fell to the second-lowest level on record in August 2021 after the four consecutive months of contractions, dropping by 11.9% MoM, while crude oil output remained around a low level, up slightly by 0.8% MoM.

Kis Vietnam said the near-term outlook of this sector would attach closely to the economic reopening as the negative demand shock could then be solved. As long as mobility restrictions remain to the highest extent, the petroleum supply continues falling into deeper contraction.

Challenges for textiles & footwear

Textiles & footwear industries are among the ones taking the biggest hit from the pandemic under unprecedented “3-in-the-spot” conditions during the pandemic. Data pointed out that the contraction in those industries is even more severe than the first outbreak. Although Kis Vietnam views this slump as a temporary disruption under the pandemic, firms in those industries face imminent risks of canceling export orders from importers ahead of a 4Q holiday season. A failure in meeting export demand would put a heavy drag on the post-pandemic recovery path.

Both textiles & footwear industries experienced the largest reductions on record (excluding Tet’s months), by 13.0% MoM and 27.7% MoM, respectively. Meanwhile, apparel production also dropped by 8.0% MoM, which was just less than in the first lockdown.

The textiles & footwear industries would continue to face challenges in the early stage of the economic reopening. Photo: Quoc Tuan

Kis Vietnam believed that those industries would continue to face challenges in the early stage of the economic reopening as labor conditions would take more time to recover to a pre-crisis level. Besides, export demand would be put into question in September and 4Q21, as August data pointed out that export of textiles, apparel, and footwear even fell during this high export-demand period.

Electronics’s good performance

After a slump in the May-June period due to the third COVID-19 wave in Bac Giang and Bac Ninh provinces, electronics manufacturing was recovering fast in July and August at a two-digit pace. Production indexes for electronic components and mobile phones hit their highest levels in 2021, up 12.2% MoM and 2.7% MoM, respectively, but still lower than the same period last year. This strong increase in production output was supported by solid export demand. Besides, the latest launch of Samsung’s two flagship phones Z Fold 3 and Z Flip globally is also expected to boost electronics production in the coming months.

“As high-tech manufacturing hubs for the electronic industry in the Northern region, including in Bac Ninh, Bac Giang, Thai Nguyen, Hai Phong, etc., remain normally operational, combined with increasing export demand for a coming holiday season in major markets, we believe this industry would perform well in coming months”, Kis Vietnam said.

The burden on food and beverage

Featuring as labor-intensive in manufacturing activities, the food and beverage industries have been significantly impacted by the lockdown measures. Output levels in both F&B industries dropped sharply in July – August period, this drop was much worse than in the first lockdown. Food productions fell by nearly 9% MoM in August, accumulating to about a 15% drop in July - August, while the figures for the beer industry were - 22.61% MoM in August and - 30.8% in two recent months.

Kis Vietnam said that skyrocketing costs in maintaining production activities under the “three on the spot” requirement and broken domestic logistics conditions would be puzzles that manufacturers have yet found effective solutions for the time. Furthermore, a long-lasting shutdown in domestic catering services also put a burden on those industries in the recovery phase ahead.

The construction materials would see a fast and strong recovery in the post-crisis period. Photo: Quoc Tuan

Recovery in construction materials

As construction activities have been postponed in covid-hit areas, production of construction materials has also slowed down in June – August period. Output levels for iron & steel and cement continued decreasing for three consecutive months since June, although the reductions were somewhat limit  ed in August, by 1.3% MoM and 1.1% MoM.

A spotlight in iron & steel manufacturing is that export demand for iron & steel products has continuously recorded three fresh record highs in June – August period, growing from 2 to 3 times to the same period last year.

“We expect that this industry would see a fast and strong recovery in the post-crisis period, supported by pending-up domestic demand and strong export demand”- Kis Vietnam forecasted.