Local wood processing enterprises need to widen supply chains with a focus on seeking suppliers from domestic and overseas markets to ease disruptions from China due to the coronavirus (COVID-19) outbreak, experts said.
According to Vietnam News, Do Xuan Lap, chairman of the Vietnam Timber and Forest Product Association (VTFPA) said that this year may be a bumpy one for the wood processing industry as the fast-spreading virus outbreak have been impacting trade between Vietnam and China, as well as Vietnam’s exports to other countries.
The wood product industry is affected since certain materials used are from China. Lap said in terms of cost prices of producing wood products, wood materials account for only 35 per cent, while other cost comes from auxiliary materials such as paint products, which are usually made in China even if the brands are from the U.S.
To Xuan Phuc, an expert from Forest Trends, also agreed. “China is an important source of auxiliary materials for Việt Nam’s wood industry with items such as straps, accessories, sliders, hinges, paints and chemicals. Businesses also need to find alternative sources of supplies, especially when the materials imported from the previous period are only enough for 2-3 months of production,” Phúc said.
Lap urged local enterprises to seek out alternative raw material suppliers in Vietnam and other countries as soon as possible.
More collaborations between enterprises needed
“Domestic enterprises also need to connect with each other so that their products can join the supply chains of export products. When they collaborate to produce products that meet the importers’ demand, they can quickly join the global supply chain,” he told a seminar on prospects for Vietnam’s timber industry in 2020 last Friday in Hanoi.
However, Lap stated that as of now, the links in the value chain of the timber industry – vertically or horizontally – are very limited. The newly-formed links are small in scale and mainly limited to links between the forestry plantation households and some wood processing companies such as Scancia Pacific, Woodsland and Nam Dịnh Forest Products Joint Stock Company.
Foreign direct investment (FDI) still plays an important role in exports with half of Vietnam’s wood export value coming from this sector. The links between the FDI sector and domestic companies are almost non-existent, Lap said.
Slowdown in Chinese demand of wood materials
The coronavirus has also slowed down China’s demand for wood materials. Phuc said COVID-19 has driven down demand from Chinese paper and pulp companies. At the same time, halts of some ports in China and stringent inspection of loading goods activities by ships have also hampered Vietnam’s exports to this country.
Wood chips are Vietnam’s main export products to China with a turnover of more than US$972 million in 2019, or 79.2 per cent of total export turnover of wood and timber products. Meanwhile, Vietnam imported $400 million worth of wood planks last year.
Expanding export opportunities
Vu Hai Bang, chairman of Woodsland Joint Stock Company, said the epidemic will have a major impact on wood companies in the early stages but with the dynamic and quick solutions, they will overcome difficulties. He also called on enterprises to search for domestic suppliers.
The United States is currently the largest importer of wood and wooden products from Vietnam. In 2019, the US imported $5.1 billion of wood products, accounting for nearly 50 per cent of Vietnam’s total exports and up 42 per cent year-on-year.
“There are opportunities to expand exports for the timber industry, mainly to the US market, but the risks of trade and investment fraud in the timber industry still go hand in hand with these opportunities,” Bang said.
Source: Vietnam News