Textiles and garments are among those industries affected by disastrous flooding in the central region, the main manufacturing base for the industry. The impact has been felt throughout their supply chain, with production disruptions in related industries, midstream and downstream. The list of damaged factories accounts for 51.4 percent of total number in the industry, mostly located in Bangkok and the vicinity. The majority are garment manufacturers, followed by spinning, weaving, knitting and home textiles.
KResearch holds the view that these export categories may be hurt by the deluge in 4Q11 – normally their high season – so the export value will likely be lower than our previous forecast. Aside from losses in production output, businesses may be hit even harder if customers shift their orders to other countries, e.g., Indonesia and Vietnam, our main rivals in the region, which export products of comparable quality to global markets. Given this, Thai textile and garment exports for 2011 may only reach a value of USD79-81 billion, growing only 3.0-5.0 percent YoY, down from the growth of 19.1 percent in 2010. The most heavily affected products will likely be garments, yarn and fibers. Nonetheless, we expect that output and exports will pick up in 1H12 after the resumption of shipments following recovery work at previously submerged factories. Should renovation be prolonged, some downstream plants may be forced to rely more on imported materials.
Close attention should be paid to the situation in western Bangkok and down to Samut Sakhon, the passageway of floodwater to the sea where large midstream to downstream producers e.g., dying, weaving and garment-producing plants are located. Protracted flooding there would further exacerbate sagging exports.
Finally, opportunity losses and reduced competitiveness will prove to be another economic downside that cannot be gauged in monetary terms. Lost production capacity prior to recovery at affected factories will mean that we may lose out to rivals in this highly competitive industry.
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