Wood firms struggle due to canceled export orders

High inflation and market volatility have led to the cancelation of large numbers of wood orders, placing wood processing enterprises in Vietnam in a tough position.

Representatives of many woodworking companies and the Handicraft and Wood Industry Association voiced concerns over the difficulties plaguing the wood industry, according to a survey of member businesses.

Several orders were recently canceled or downsized, while some importers have requested a temporary freeze on their orders although Vietnam’s businesses plan to continue producing their products.

Some importers canceled their orders without advance notice, while others left their ordered products in Vietnam and made excuses for delayed payments. Several importers even canceled their orders when the products were already under production.

Nguyen Van Sang, director of Viet Products and owner of the Furnist store chain, said the number of wood export orders his company received suddenly decreased by 30% in July this year.

His products are mainly shipped to the U.S. and Europe. However, people in these markets have tightened their spending due to high inflation, leading to a decline in the demand for non-essential goods such as wood products, he added.

Some 47 out of 52 enterprises participating in the survey reported a decline in export orders.

Accordingly, 14 enterprises faced a decrease of 70-90% in orders, while 18 businesses witnessed a decline of 30-60%. Some 15 enterprises reported a drop of 10-30% and only five wood businesses saw their export orders increase by 10-30%.

Due to the sharp decline in export orders, many wood processors downsized their production scale, resulting in mass layoffs.

Some 65% of woodworking businesses reported a reduction in labor at 20-50%, and some businesses witnessed a decrease of up to 70% compared to the pre-pandemic levels.

The difficulty in accessing bank loans is another concern of the woodworking businesses. Some 29 enterprises in the survey said they didn’t receive credit support and had to borrow loans at high interest rates.

Additionally, woodworking enterprises from China have recently sprung up in Vietnam, competing with Vietnamese firms, which already have to undergo many inspections from relevant agencies.

The U.S. market’s trade remedies against Vietnamese wood products have put further strain on Vietnam’s wood industry.

Thus, many businesses proposed speeding up the disbursement of bank loans as well as solving problems related to credit packages as soon as possible. Without bank loans, businesses find it extremely difficult to deal with the current situation.

Enterprises also proposed reducing interest rates, land tax, social insurance expenses and the frequency of inspections by state management agencies.

Le Hoang - HCMC