In contrast to the full order books at the beginning of the year Vietnamese wood and wooden furniture enterprises are currently facing many difficulties due to the cancellation of orders by customers because of inflation in countries such as the US and the EU and the sharp increase in input material costs. Source: Tropical Timber Market Report
In fact, Vietnam’s wood industry is seeing declining sales overseas. The export value in July was estimated at US$1.41 billion, down 5.5% against June and down 1.6% year-on-year according to a report of the General Department of Forestry under the Ministry of Agriculture and Rural Development (MARD). This was the second month that the export of wood and timber products decelerated.
Earlier, figures from the General Department of Customs showed exports of wood and wood products in June were down nearly 11% year-on-year. Through the first seven months of the year, wood and wood product exports were US$10.4 billion, up just 1% year-on-year.
According to market insiders the wood industry will face a big challenge due to a decline in export orders in the latter half of this year. A quick survey of 52 timber businesses conducted by the Vietnam Timber and Forest Products Association (Vifores) in collaboration with Forest Trends showed that most companies witnessed decreasing revenues in the US, EU and UK markets.
Thirty-three out of 45 firms exporting to the US said their revenues decreased by nearly 40% compared to the first months of this year. A similar trend is seen in the EU and the UK, with two-thirds of the surveyed enterprises reporting revenue drops of over 41%.
Moreover, about 71% of businesses said that orders will continue to drop towards the end of the year. Under the current market situation, 44% of businesses expect revenue will fall by over 40% for the whole year.
In response to the decline in purchasing power in the EU and the US markets business is looking to boost furniture exports to Japan and South Korea where inflation has had less of an impact than in other countries.
Vietnam’s wood industry is integrated deeply with international markets so high inflation and tightening credit policies in major markets is driving down demand for non-essential products including wood and wood products.
High inflation in major markets such as the US, EU and UK is having a direct negative impact on the production and business activities of wood processing enterprises. They are currently facing many difficulties in terms of capital, labour costs and input materials.
Vietnam has become the world’s sixth largest exporter of wood and wood products, the second largest in Asia and biggest in the Southeast Asia and this has attracted scrutiny from major trading partners.
The industry aims to have more than 80% of wood processing and preservation establishments equipped with advanced technology and all timber and wood products for export and domestic consumption will be made from verified legal raw material.
