Vietnam wood processors await market recovery

Vietnamese wood businesses are facing countless difficulties due to a lack of orders, rising costs, and slow tax refunds, and many of them have scaled back operations as they wait for the market to recover.

Falling exports

The latest statistics from Vietnam Customs show that in the year to September 15, Vietnam’s total export value reached $242.04 billion, down $23.44 billion or 8.8% year-on-year. Of which, the shipments of wood and wood products fetched $9.01 billion, a decrease of 22.8% compared to the figure of $11.67 billion achieved in the same period last year.

Nguyen Chanh Phuong, vice chairman of the Handicraft and Wood Industry Association of Ho Chi Minh City (HAWA), said the wood industry is targeting an export turnover of $17 billion in 2023. However, exports of wood and wood products have been slow, with most businesses facing a shortage of orders in most businesses.

In the first eight months of 2023, Vietnam's export turnover of wood and wood products reached about $8.3 billion, down nearly 26% year-on-year.

"Since May 2023, Vietnam's exports of wood and wood products have shown signs of a recovery, with over $1.2 billion per month in turnover on average. Meanwhile, Vietnamese businesses’ raw wood imports have climbed 5-10% per month. This shows that wood producers are preparing for year-end orders," Phuong said.

He predicted that from now until the year-end, wood and wood product shipments could bring home an additional $6 billion, raising the total export turnover in 2023 to about $14-14.5 billion.

Production on hold

Regarding the recovery prospects of the wood industry, a representative of Thien Thanh Phat Timber Co., Ltd said that the wood industry is completely dependent on the international market, with a large number of supply orders for the U.S., Europe and China. When the world economy remains volatile, the Vietnamese wood industry is also struggling.

"Like textile-garment businesses, wood producers are facing huge difficulties as the number of orders reaches only about 30-40% of the previous period," he said.

According to Le Hoang Hai, director of CMH Vietnam Import-Export Trading Co., Ltd., there are signs of recovery in the wood industry, but not yet clear, reflected in the irregular number of orders, while raw material prices are escalating. Therefore, businesses are operating moderately.

"The current wood market is unpredictable, with unstable prices and orders. For example, to produce domestic furniture, we need to buy wood. But furniture orders are irregular, with only short-term orders of two or three months, causing difficulties for the balancing of production materials.

"If we buy a lot, we will have large inventory when there are no orders. If we buy a little, we will fall into passive position when the market demand increases. So currently, we are very worried and in a holding mode," he said.

The recovery of the wood market depends much on the real estate industry, which is forecast by the Vietnam National Real Estate Association to remain quiet until the end of 2023 and only recover and develop healthier from the second or third quarter of 2024 thanks to legal improvements, economic growth and removal of financial bottlenecks.

In addition, many wood businesses revealed that one of the current difficulties is the delay in refunding value-added tax (VAT). In fact, many of them have had tax refunds delayed for two years in a row, making them exhausted.