Editor’s pickVietnam: A vital and growing market for U.S. hardwood lumber
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Figure 1: Vietnam accounts for 10 per ent of all U.S. hardwood lumber last year
By Judd Johnson, Hardwood Market Report
The volume of hardwood lumber exported from the U.S. to Vietnam pales in comparison with the volume exported to China. Then again, so does the volume exported to every other market in the world. China accounted for 54 per cent of all U.S. hardwood lumber exports last year while Vietnam was about 10 per cent of the volume (see Figure 1).
While substantially lower than China, 10 per cent is not insignificant. In fact, purchasing 10 per cent of the total volume exported distinguishes Vietnam as a top five market destination for U.S. hardwood lumber. It also elevates Vietnam to the third largest foreign market for U.S. hardwood lumber last year. Together, the top five foreign markets accounted for 85 per cent of all U.S. exports of hardwood lumber in 2017.
The analysis of Vietnam gets even more interesting and, frankly, reasonable, when setting both China and Canada aside. These are the top two U.S. markets. China is such a large consuming nation, in addition to being a global manufacturing behemoth, its scope is incomparable to any other foreign market for U.S. hardwood lumber.
Canada is both a consumer of hardwood lumber and manufacturer of hardwood goods distributed worldwide. But Canada also imports and re-exports U.S. hardwoods to augment its own hardwood lumber exports. It is reasonable to believe market destinations for hardwood lumber exported from Canada are the same as those for hardwood lumber exported from the U.S.. Therefore, omitting Canada from this analysis would prevent double-counting some portion of Canada’s hardwood lumber exports reaching final destinations.
Figure 2 provides a better perspective of how Vietnam ranks among U.S. markets. The volume of hardwood lumber purchased by Vietnam from the U.S. increased by 17 per cent in 2017 from 2016. Total purchases of 444,862 cubic meters established a new record high (see Figure 3). The sharp gain in volume last year followed a more moderate increase in 2016, which followed contraction in 2015. Other markets also reduced purchases in 2015 but did not recover from the downturn in 2016 or 2017 as brilliantly as Vietnam. Vietnam is distancing itself from other markets for U.S. hardwood lumber.
Figure 2: Vietnam's rank among the U.S. markets
Among the most important reasons for Vietnam’s rise to a top five market for U.S. hardwood lumber are the government’s favourable positions on global investment and trade. Additionally, low-cost labour was an initial attraction and is still important for drawing and keeping manufacturing in the country. However, it is notable that the low-cost Vietnamese wood products labour force has become a skilled labour force over time.
A natural progression for any emerging economy is higher wages and increased personal wealth for the country’s citizens. This could eventually jeopardize the “low-cost labour ” status for Vietnamese wood products manufacturing industries. Yet, low-cost labour without adequate infrastructure is not enough for corporations to relocate manufacturing facilities.
Figure 3: Vietnam established a record high in the purchase of U.S. hardwood lumber last year
Reliable ports, roads, and electric power are fundamental to any manufacturing operation. It makes no difference how low employee wages are if raw materials and manufactured goods cannot be transported on schedule. Nor do low wages matter if manufacturers cannot operate machinery as needed because electric power supply is unreliable.
These systems have been developed in Vietnam and continue to be improved upon. Not all other low wage countries have such advantages. Infrastructure, low-cost skilled labour, and a government that looks favourably on business are reasons Vietnam became a top five market for U.S. hardwood lumber, and answer why Vietnam will remain a global wood products manufacturing hub in the future.