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Nike Could ‘Run Out’ of Vietnam-Made Sneakers, Expert Warns

An expanding Covid-19 outbreak could dry up Nike’s stream of Vietnamese sneakers, an S&P Global researcher warned Monday.

Last week, two Nike suppliers—Pou Chen Corp. and Changshin Vietnam—halted production at factories in and near the country’s largest city. Reuters reported the closures Wednesday and Thursday, respectively. At the time, authorities linked Pou Chen’s Ho Chi Minh City plant to 49 infections.  When it announced the Changshin closures, the government said many of the 177 infection cases detected in the local province, Dong Nai, were tied to the factories.

In light of these closures and the accelerating spread of Covid-19 in South and Southeast Asia, Christopher Rogers, a senior researcher with S&P Global Market Intelligence’s global trade data division Panjiva, warned Nike “may run out of Vietnamese sneakers.”

After Rogers published his report, Tapei Times reported that another Nike supplier, Feng Tay Enterprises Co Ltd, had temporarily shut down four factories for about a week Saturday. Three of these plants manufacture footwear for Nike in Dong Nai.

“The health and safety of our teammates, as well as that of our suppliers, remains our top priority,” Nike said in a statement responding to the temporary closures. “We continue to work with our suppliers to support their efforts in response to the dynamic and unprecedented nature of Covid-19. As we continue to navigate these circumstances, we expect our suppliers to prioritize the health and livelihoods of their employees and continue to comply with legal requirements and the Nike Code of Conduct on the provision of wages, benefits and severance. We are confident in Nike’s ability to navigate these near-term dynamics and we remain prudent in our planning.”

As part of its transparency efforts, Nike maintains a website mapping all its independent factories and materials suppliers. According to this map, 137 of the 608 independent factories manufacturing finished Nike goods are located in Vietnam. Of the roughly 1.07 million workers employed at Nike-partnered plants worldwide, more than 450,000 are in Vietnam. Fifty-three factories and more than 306,000 workers are involved in manufacturing Nike footwear in the South Asian country.

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In Nike’s most recent earnings call late last month, chief financial officer Matt Friend said the company expects “supply chain delays and higher logistics costs to persist throughout much of fiscal 2022.”

Based on the map’s latest data—Nike last updated it in February—the three factories Feng Tay temporarily shut down Saturday employ more than 31,000 workers. According to Reuters, Pou Chen’s Pouyuen Vietnam factory employs 56,000 workers and the three Changshin plants nearly 42,000.

All three suppliers are either located in Dong Nai or Ho Chi Minh City, both of which enacted new social distancing restrictions—known as Directive 16—July 9. The measures, originally set to last 15 days, generally ban non-essential services and businesses.

When the health ministry first announced the closure of the Pouyuen Vietnam factory, it said the business had been unable to arrange for workers to sleep on-site as required to stay open, Reuters reported. Feng Tay attributed its closures to stringent travel restrictions blocking employees from working in the region. The timelines offered by all three suppliers appear to line up with when the measures enacted on July 9 are scheduled to expire.

Whether these restrictions are ultimately lifted at the end of the week is unclear. Coronavirus cases have skyrocketed since July 9. According to Johns Hopkins University, 25,367 of the country’s 55,845 confirmed Covid-19 cases—and more than half of its 254 deaths—were reported last week. Just 0.32 percent of the population is fully vaccinated. Over the weekend, the U.S. embassy and consulate in Vietnam reported that authorities had ordered the implementation of Directive 16 in the country’s southern provinces no later than midnight Monday. The capital city of Hanoi also temporarily suspended non-essential services Monday.

According to the Vietnamese government’s “online newspaper,” Prime Minister Pham Minh Chinh convened a meeting Monday “to seek stronger and more drastic measures to contain the pandemic in southern cities and provinces.” At the end meeting Pham reportedly said the “very complicated” situation in southern localities requires “the government to issue a resolution on Covid-19 response applicable nationwide.”

Panjiva data shows Vietnam accounted for 49 percent of U.S. seaborne imports linked to Nike in the second quarter. Over the 12 months ended June 30, 82 percent of the company’s imports from Vietnam were footwear, Panjiva found. In the second quarter, these footwear shipments climbed 28.8 percent year-over-year.

Nike is not the only footwear player with a growing presence in Vietnam. According to Panjiva, Wolverine World Wide—the company behind brands like Saucony and Sperry—saw seaborne imports from the country shoot up 161 percent year over year in the second quarter. Puma’s imports jumped 123 percent over the same time period. Total seaborne imports from Vietnam climbed 54 percent last quarter.