Vietnam: Tough times reflected in wood product companies business results

Sursa:
ITTO/Fordaq
Vizualizări:
953
  • text size

The business results of major Vietnamese wood exporting enterprises have started to show weakness and this, it is said, is due to the impact of inflation in export markets which has resulted in a decline in orders. Exporters expected this to last into next year as people in importing countries continue to reduce spending.

Compared to the export target of US$16.5 billion this year the wood industry had, by October, achieved 78% of the target and needs an additional US$3.7 billion in exports in the final quarter of the year to meet the target.

However, the wood industry is currently facing many difficulties, especially having just experienced a long period of reduced production, weak international demand, high inflation and the impact of Russia’s invasion of Ukraine which is disrupting ogistics.

According to Nguyen Quoc Khanh, Chairman of Ho Chi Minh City Handicraft and Wood Processing Association (HAWA), inflation has greatly affected the export growth of the wood processing industry over the past months.

Inflation is not only increasing in the US but also the other markets for Vietnamese wood and wood products.

Consumers in the main market countries are tightening spending. Therefore, demand for non-essential items such as wood products is unlikely to increase any time soon. What do businesses need to do?

Huynh Quang Thanh, General Director of Hiep Long Wood Processing Co., Ltd. said that orders for the final quarter of this year declined by about 15% over the same period last year. Mr. Thanh assessed that this is a much lower reduction than other enterprises in the wood processing and export industry.

Hiep Long's strategy is aimed at medium-sized customers instead of large ones. "Large customers, when there is a problem, have a greater impact on businesses but when selling to many medium-sized customers risks are spread.

According to Thanh, in the past, furniture wholesalers in other countries made market forecasts and then imported stocks first. But in the current unstable situation businesses have brought inventory to a very low level. Thanh also predicted that this situation could last until the middle of next year. "After a period of suspension of imports, the inventory of enterprises will run out and they will start buying goods again" – Mr. Thanh expected.

According to the Ministry of Agriculture and Rural Development, demand for furniture is still substantial. When orders from major markets such as the US and Europe are cut Vietnamese enterprises can expand into some markets with more stable growth.

According to the analysis of some industry experts Vietnam can diversify to UK, German, Norwegian markets where there is high average furniture consumption. According to statistics from the International Trade Center (ITC), in the first 6 months of 2022 the import value of Norwegian wooden furniture reached US$530.4 million. The German market has a furniture import value of US$2.8 billion. Enterprises can capture and expand exports to these markets.

Meanwhile, Mr. Nguyen Hoai Bao, Vice Chairman of Scansia Pacific Co., Ltd. said that the current quiet period is an opportunity for businesses to restructure production activities, invest and upgrade technology to create a foundation for recovery when market demand grows again.

 

Click here to view offers of Vietnamese companies published on Fordaq's marketplace

Postează un comentariu