Vietnam’s wood export revenue is forecast to rise 20% in 2020. However, the industry cannot avoid the impacts of the recent epidemic, necessitating efforts to diversify its export markets.
The Covid-19 epidemic has been directly affecting the exports of a number of industries in Vietnam during the opening months of 2020. The wood industry is one of the rare industries that has not significantly suffered due to the epidemic.
Founder and Chairman of Global Integration Business Consultants Company (GIBC), Pham Phu Ngoc Trai, said that Vietnam's ability regarding handicrafts production and wood processing has been recognised worldwide. The proof is that "Made in Vietnam" furniture is available all over the world, even in the most high-grade sectors. Vietnamese wood producers have also participated in providing products for international-standard constructions.
Vietnamese wood products have become increasingly popular and brand affirmed. Statistics from the Vietnam Timber and Forest Product Association (VIFORES) show that the wood industry has not been negatively affected by the Covid-19 epidemic as its export revenue reached US$15.3 billion in the first two months of this year, an increase of about 10.1% over the same period last year. Many wood enterprises believe that the growth of wood exports will reach 20% by the year’s end.
Despite the US-China trade war in 2019, the Vietnam’s wood industry still grew by 22% in 2019 and achieved an export turnover of about US$11.2 billion. Although the world economy has suffered from the negative effects of the Covid-19 epidemic in early 2020, the Vietnamese wood industry is a rare example of one that has not been heavily impacted, even enjoying some benefits from the former..
Chairman of Binh Duong Province Timber Association Dien Quang Hiep said that since the beginning of the year, many factories in China have stopped working to limit the spread of disease. Therefore, the orders for wooden products have poured into other countries, including Vietnam, helping to increase export turnover.
Meanwhile, Vietnam’s domestic wood production mainly uses domestically-produced materials and the shortage of wood is imported from other countries such as the US, Canada and Africa.
In terms of wood exports, Vietnam's main destination markets are the EU, the US and Japan, so the impact of the epidemic is insignificant. In addition, Vietnam has participated in a number of new-generation free trade agreements (FTAs). The EU-Vietnam FTA (EVFTA) has been ratified by the European Parliament and is expected to take effect this year, which will create further opportunity for the Vietnamese wood industry to grow as taxes imposed on Vietnamese wood products exported to the EU will be gradually reduced to 0%.
Market diversification is necessary
Although the wood industry has yet to be affected by the Covid-19 epidemic, 2020 is still considered a turbulent year for the industry. Chairman of the VIFORES Do Xuan Lap said that woodchips are the most important wood products exported from Vietnam to China, with a turnover of US$972.2 million in 2019, accounting for 79,2% of total export turnover of all Vietnamese wood products exported to China.
The Covid-19 epidemic has caused Chinese paper and pulp companies to cease operations or reduce their scale, making it difficult for Vietnamese woodchips exporters in this market. Therefore, market diversification is necessary to reduce risk.
Chairman of the Board of Directors of Woodsland JSC Vu Hai Bang, said that the biggest impact of the Covid-19 epidemic is related to the supply of some raw materials from Chinese suppliers like accessories or surface coating materials (paint). Paint accounts for 7% of the cost of a product but without it, the entire batch of wood products is affected. The disruption of supply will also greatly harm producers.
Wood export has remained one of the focuses of the Vietnamese wood industry. Experts say that the wood industry not only aims to grow by 20% in 2020, but also looks towards stable and sustainable development.
Therefore, businesses and management agencies need to grasp the needs and tastes of export markets, as well as studying potential incidents in the future in order to develop reasonable strategies. Identifying, controlling and eliminating risk is a vital condition for the industry, particularly in established markets with high requirements regarding product legality and sustainability.
Management agencies and enterprises in the industry have been developing many mechanisms, policies and solutions to minimize risk. To Xuan Phuc, an expert from Forest Trends, said that information about the industry should be accurate and transparent, reflecting the actual picture of the industry. This will support decision-making and balance priorities, in order to foster sustainable development in the future.
Attending trade promotion events is also a way to diversify the export market for Vietnamese wood products. Deputy Director of the Trade Promotion Department (Ministry of Industry and Trade), Bui Thi Thanh An, said that the organizer of the Las Vegas furniture fair in the US has sent an open letter to invite Vietnamese timber suppliers to participate in the fair in July 2020.
At the same time, they suggested that the Trade Promotion Department will work with Furniture Today Magazine to promote the Vietnamese furniture brand in the US. US wood buyers are seeking other sources to gradually replace the Chinese market share as Chinese wood products are being subjected to high taxes together with the various impacts of the Covid-19 epidemic. This is a good opportunity for Vietnamese businesses to participate in advertising to and approaching customers in the US, one of the largest markets of Vietnamese wood products, helping thereby to diversify the market and connect with more potential customers.
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