Wood exports to the U.S. warming up: association

Wood exports to the U.S. are warming up, although turnover to the market in the last few months was down compared to the same period last year, said Nguyen Chanh Phuong, vice chairman of the Handicraft and Wood Industry Association of HCMC (HAWA).

The Ministry of Industry and Trade's (MoIT) Agency of Foreign Trade estimates that in July 2023, the export value of wood reached $1.15 billion, up 5.5% from June 2023 but down 12.7% from July 2022. The export value of wood products was $7.2 billion in the first seven months of 2023, a decrease of 26.2% from the same period in 2022.

The export of wood to main markets decreased significantly in the first half of the year, according to the MoIT's Vietnam Industry and Trade Information Center. The U.S. remained the main market for Vietnamese wood. In H1/2023, export turnover of wood to this market reached $3.3 billion, accounting for 54% of the total, down 33% over the same period in 2022.

Positive signs from U.S. market

According to Phuong, the reasons driving the expansion of the U.S. market are lower inventories and increased construction activity. Furthermore, the market becomes more active as the holiday shopping season approaches.

According to Bloomberg, new home construction activity in the U.S. demonstrates that businesses are attempting to fill the gap left by a lack of available homes. In particular, the number of new dwellings in the U.S. in June 2023 totaled 1.43 million units, down 8% from May 2023 and lower than Bloomberg's average expectation of 1.48 million units. The number of construction permit applications reached 1.44 million units, a 3.7% decrease from May 2023.

However, single-family building permits have reached an all-time high. Despite the drop, the number of new homes being developed is increasing at a quicker rate than before the Covid-19 outbreak.

The restricted availability of housing, combined with the numerous incentives offered by construction companies, has increased buyer interest in new homes. The above factors will increase demand for imported wood and wood products, particularly wooden furniture, in the U.S. in the coming time. If the export turnover of wood to the U.S. improves, Vietnam's wood sector exports will rebound in H2/2023.

Wooden furniture for export saw favorable signals too, as demand from the U.S. has increased. The U.S. economy is showing signs of revival, with consumer demand increasing. The U.S. government and its corporations continue to pay attention to Vietnam and pledge robust business collaboration. As a result of the positive rebound, big U.S. retail chains have begun to resume orders with Vietnam.

With 330 million people, the U.S. is a massive market, with more than 2.1 million Vietnamese Americans. The Vietnamese community in the country is continually looking to their homeland and wants to buy Vietnamese goods. The above factors represent a significant opportunity for Vietnam's export commodities, including wood products. The network of thousands of enterprises overseas offers a possible distribution channel for bringing Vietnamese goods deeper into the U.S. market.

According to Tran Lam Son, deputy general director of Thien Minh Import-Export Co., Ltd., the U.S. market is exhibiting signs of improvement. Thien Minh specializes in plantation wood as well as bamboo and rattan.

Two years ago, the Japanese market accounted for approximately 50-60% of this enterprise's overall export earnings, while the U.S. accounted for approximately 40%. However, the U.S. market currently accounts for approximately 50–60% of the company's overall export revenue.

Son said that, while shipments to the U.S. were still down from the previous year, orders were up because clients were gearing up for the holiday shopping season. Thien Minh is also taking numerous steps to enhance production and exports.

He noted that during peak times, shipping costs to the U.S. were more than $10,000 per container, but that cost has fallen to around $1,000 per container. This reduction in freight expenses has lowered product prices. Furthermore, the corporation and its partners are looking for ways to optimize containers.

Thien Minh and its partners are also monitoring the market in order to react. According to his observations, many items priced at $399/unit sell very well, however, products priced at $425 per unit sell less well. The $499 product is subpar. As a result, the company and its partners seek ways to minimize product costs while meeting market demand.

According to a representative of Bao Hung Co., Ltd., a manufacturer of wooden furniture, shipments to Japan accounted for 60% of its total export revenue two years ago, while the U.S. accounted for 40%. Now, 60-70% of exports are to the U.S. The U.S. market gained somewhat due to end-of-year imports while the Japanese market remained stagnant.