Vietnam’s wood product manfacturers need to restructure production

Vietnam’s wood processing enterprises will need to continue reorganising their production and business activities to manage challenges during the novel coronavirus (COVID-19) pandemic, said the Ministry of Agriculture and Rural Development (MARD).

According to Vietnam News, the restructuring would help enterprises transit to production and business plans that can respond and adapt to the existing situation while preparing resources to continue operation as soon as the pandemic ends.

The above points were mentioned in the ministry’s official letter sent on Tuesday (24 March) to the Vietnam Timber and Forest Product Association (VIFORES) and the wood processing enterprises.

The ministry said that with the COVID-19 pandemic now spreading globally, Việt Nam’s economic sectors have already felt its impact, including the timber and forestry processing industry.

It suggested that associations and enterprises report the current challenges to their provinces or states’ People’s Committees, as well as relevant ministries and sectors. They should also propose their solutions that the government can help to provide to maintain stability in production.

Meanwhile, the ministry will continue to monitor production and businesses of wood products at home and abroad. It will collect recommendations provided by the association and enterprises and for them to receive support packages. The packages were issued early this month for domestic businesses to deal with difficulties during the pandemic.

VIFOREST forecasted that Vietnam will see significant decline in exports of timber and wooden products in the next three months due to COVID-19.

According to the association, five major markets account for nearly 90 per cent of Vietnam’s wood and wood products exports including the U.S. (accounting for 50 per cent), Japan (13 per cent), China (12 per cent), the EU (8 per cent) and South Korea (8 per cent).

Currently, some seaports in the U.S. are closed to imported goods. Also, wooden furniture is not considered an essential good, said Nguyen Liem, chairman of the Binh Duong Wood Processing Association and general director of Lam Viet Joint Stock Company.

Many EU countries have announced lockdowns to prevent the spread of COVID-19 so demand for non-essential goods, like wooden products, would reduce in the following months.

Therefore, many companies from importing countries, especially the U.S. and EU, have informed their suppliers in Vietnam to stop new orders, delay imports of Vietnamese wooden products or even stop imports under signed contracts, according to Liem.

This situation has occurred in almost all factories in Dong Nai and Binh Duong provinces because foreign partners said they must close stores and distribution centres.

With the difficulties in exporting to the U.S. and EU, many local enterprises are considering to turn their focus to the domestic market, he said. However, it is not easy because domestic customers have different demands, requiring different production technologies. The distribution system is also not available in the domestic market, he said.

The existing difficult period is expected to last for the next three to six months or even longer, so the businesses have focused on reducing production costs, he said.

The association has also forecasted that Vietnam’s wood and wood products exports will decline sharply in the next three months.

According to MARD, in the first two months this year, Vietnam’s wood and wood products export value was US$1.67 billion, with a year-on-year increase of 13.5 per cent.

Exports to China reached a growth rate of 19.1 per cent in the first two months because the exports were shipped mainly by sea so the pandemic did not affect them.