Editor’s pickVietnam: The place to be for the wood processing industry

13-09-2018
Bob Hsu,Fancy Wood,Vietnam,China,U.S,Trade War

Bob Hsu, Sales Manager, Fancywood

Q: Can you share with us about yourself and the history of Fancy Wood in Vietnam?

BH: Fancywood has been supplying to the furniture, flooring and building materials industries for more than 35 years. By the end of 1980, we were supplying more wood materials to China and Southeast Asia as where factories move, our supply and service move. In fact, from the 1990s, Asia has become the most important and biggest furniture and wooden products factory in the world.

Every month, we supply about 120 40-foot containers to the Vietnam market — mainly American and European hardwood lumber, logs and plywood. In fact, in the past decade, from 2008 to 2018, our volume to the Vietnamese market increased by more than 300 per cent.

Q: What’s the current situation for Vietnam furniture and flooring industries? Can you provide an update?

BH: It is very competitive now. As many new foreign and local furniture factories have joined in the past few years, furniture production capacity has increased a lot. Currently, Vietnam’s total production capacity is growing faster than the demand because in 2017 and 2018, many companies expanded their manufacturing facility and most of them are running at only 60 to 70 per cent of their capacity. But this is only short term as they have yet to receive enough furniture orders for their full capacity. We believe that in the near future, Vietnam will become a very important home-living and furniture manufacturer in the world. Worldwide orders will come to Vietnam very soon as you can’t find a better place in Asia than here for furniture production.

Q: Do you think the Vietnamese furniture manufacturers are facing a shortage of wood materials? If so, can you elaborate on the situation?

BH:  Factories in Vietnam mainly use rubber wood, acacia and local species. It is hard to find a factory that completely doesn’t use local lumber.

Imported foreign species consumption has also increased day by day to satisfy the market needs. For example, factories were using pine, spruce, beech and poplar lumber in 2003 to 2012 (the year 2012 is due to the financial crisis in 2008, which has hurt many industries in the world. But Vietnam furniture industry has grown a lot after the crisis). Later on, factories started to buy higher-priced species for high-end furniture such as white oak, walnut, hard maple, birch, red oak and ash. Hence, we do not think the shortage will be a problem.

On rubberwood and local species, China initially purchased a lot of rubber wood lumber and raw materials, which has vastly influenced rubberwood price. But now, the country is buying more semi-finished components or finished products from Vietnam, which makes rubberwood an inside-market product (and less impact from the outside). Let the market decides the supply, demand and price: When a species’ price is too high, factories will buy other species, hence, less shortage problem.

Foreign species have become very important as there is a demand from overseas and local customers. Vietnam furniture industry is moving forward drastically unlike 15 years ago where they focus only on cheap and basic typed of products. Now there is huge need across the globe for luxury finishing, popular species, special design, different selling channels, styles and countries. The foreign species demand will increase faster than before.

Veneer, laminate, and panels will also become more important, including plywood, MDF, and particleboard. The panels’ cost is mainly in logs, wood dust and transportation, with transportation having the biggest percentage as compared to other materials. Currently, we do not see a shortage situation, but we do think that, in the future, the panels’ supply and price will often see big and sensitive changes.

Q: With the U.S.-China tariff war happening, how do you think Vietnam will benefit from it?

BH: In the past few months, the U.S. and China trade war started, which will lead to the U.S. purchasing lesser from China, and China buying less wood materials from the U.S..

This, I believe, will benefit Vietnam as the country does not have any tariff block with both countries so importing material and exporting products will not be a problem. Vietnam not only export furniture to the U.S., but has also started to export more to China about seven to eight years ago.

With the higher tariff, I believe we will see two trends: 1) Chinese companies exporting through Vietnam or produce in Vietnam and export to the U.S.. 2) American wood materials will come to Vietnam first for production of components or furniture before exporting to China.

On a monthly average, Vietnam exports more than 15,000 containers to the U.S.. In fact, with the U.S.-China trade war, there is a potential to hit 30,000 containers when the American buyers start to move orders to Vietnam from China. This would then lead to expansion of manufacturing facilites and growing the industry further.

In addition, in the past two years, the Chinese government has been imposing higher environmental standards, hence, many factories are unable to survive in China and are moving to Vietnam to buy components or finished products, build a relationship with the Vietnamese furniture manufacturers (OEM for the Chinese market), and to invest in factories to produce in Vietnam.

As environmental policies are non-negotiable, it speeds up the industry drain. In the near future, I believe that the U.S.-China tariff war will magnify the importance of Vietnam-made products. The biggest trade in the world is between U.S. and China, and Vietnam is currently at an advantage in the 4Ps and 4Cs along with its strong relationship with both countries.