Vietnam wood and wood product exports slow down

Vietnam’s wood industry is seeing declining international sales. Exports in July are estimated at US$1.41 billion, down 5.5% against June and down 1.6% year-on-year according to a report of the General Department of Forestry under the Ministry of Agriculture and Rural Development (MARD). This was the second month that the export of wood and timber products decelerated.

Earlier, figures from the General Department of Customs showed exports of wood and wood products reached US$1.4 billion in June, down nearly 11% year-on-year.

According to market insiders, Vietnam’s wood industry will face a serious challenge due to a decrease in export orders in the latter half of this year.

A quick survey of 52 timber businesses conducted by the Vietnam Timber and Forest Products Association (VIFORES) in collaboration with Forest Trends showed that most companies witnessed decreasing exports to the US, EU and UK markets.

Thirty-three out of 45 firms exporting to the US said their revenues decreased by nearly 40% compared to the first months of this year. A similar trend is seen in the EU and the UK with two-thirds of the surveyed enterprises reporting revenue drops of over 41%.

Moreover, about 71% of businesses said that orders will continue to decline towards the end of the year. Under the current market situation, 44% of businesses expect their revenues will fall by about 44% for the whole year.

Vietnam’s wood industry is integrating deeply with international markets, so high inflation and tightening credit policies in response to rising inflation in major markets are driving down demand.

Vietnam and the UK

Even so, Vietnam’s wood and wood products exports to the UK enjoyed an increase of 14% to $72 million in the first three months of 2022. But sales to this market are also declining as consumers are tightening their spending.

In June, the value of exports declined 38% year-on-year to $16.3m, and in the first half, the rate of reduction was 7.7% to $135.5m.

While products exported to the UK enjoyed strong increases with the UK-Vietnam Free Trade Agreement (UKV-FTA), Vietnam’s timber industry is facing difficulties in expanding in this market, and this requires manufacturers and exporters to change their business strategies.

Like other parts of the world, inflation in the UK hit a 40-year high in June as food and energy prices continued to soar, worsening the country’s historic cost-of-living crisis. The Bank of England has implemented five consecutive 25 basis point rate hikes to cool high inflation and is considering a 50 basis point hike at its August policy meeting.

According to David Hopkins, CEO of Timber Development UK, the UK’s imports of wood and wood products rose in Q1 2022 as merchants start to rebuild stocks after the winter.

So far, Vietnam’s predominant timber export to the UK is furniture, but Hopkins sees another opportunity for Vietnamese exporters in niche areas such as plywood.

On furniture products, Hopkins said demand is expected to decline in the next two years after a boom in housing repair and maintenance during the pandemic before it can bounce back. This trend will likely happen in the US and the EU which are also suffering from high costs of living.

To better compete and expand sales in the UK, Hopkins suggested Vietnamese manufacturers and exporters invest in marketing and promotion to enhance awareness among UK consumers about Vietnamese products. The concepts of legality and sustainability are important for consumers in the UK and are backed up by legislation.