High costs hit wood product manufacturers in Vietnam

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Vietnam News has reported that rising input costs are eroding the profits of wood product manufacturers, putting them at risk. Additionally, sanctions on Russia are likely to cause a decline in supplies of timber raw materials from Russia. As timber supplies become tighter, Vietnamese firms will have to compete more fiercely in international markets, especially for timbers from the EU and the US.

According to VIFOREST, Vietnam has been importing 5.5-6.5 million cubic metres of timber raw material every year. Higher raw material prices coupled with mounting transportation costs have added to import bills driving down profitability.

Phan Văn Phước, director of Tân Phước, forecasted that the timber shortage will last for some months, according to Vietnam News. He said his firm had to raise prices to remain operational and would not import additional timber in the short term due to high costs.

Tran Quoc Manh, general director of Sai Gon Trading Production Development JSC, is more concerned about fuel costs than timber prices. He said petrol prices had hit up to VND27,000 (US$1.18) per litre exceeding manufacturers’ capacity to absorb the rise. Accordingly, manufacturers are reluctant to sign new contracts for fear that petrol prices will continue to go up further.

“Many manufacturers of wood products have to stay idle amid high fuel costs and freight rates. They are unwilling to sign new contracts due to cost uncertainties,” he explained.

Rising oil prices have pushed up freight rates bringing transportation costs to a new high. Freight rates have increased five-fold since the pandemic began and the Russian invasion of Ukraine has made things worse.

The chairman of Dong Nai Province’s Association of Wood and Handicraft, Le Xuan Quan, has urged the authorities to discuss with shipping lines how to stabilise freight rates. He also called for close cooperation between forest growers and timber-processing firms to develop sustainable sources of timber for the industry to lower the dependence on imported materials.

A spokesperson for General Import and Export Van Xuan Corporation has suggested a data portal on timber to help manufacturers monitor prices and supply to better manage input costs and inventories.

Source: ITTO