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The wood industry faces difficulties when the price of raw materials increases

The increase in the price of raw wood on the world market has affected the production and processing of wood furniture in Vietnam. Every year, Vietnam imports about 5-6 million m3 of logs and sawn timber for processing furniture. The high price of imported wood affects the production of enterprises, while the wood materials for plantations in Vietnam are still mostly of low value.


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Wood production at an enterprise in Dong Nai

According to businesses, in the long run, it is necessary to be proactive in the source of wood materials, in which to improve the quality of wood from Vietnam's plantations to meet international standards.

 

Pressure from the price of imported wood materials

According to Mr. To Xuan Phuc, a policy analyst, Forest Trends Organization (specializing in analyzing strategic markets and policy issues for forest products), Vietnam's wood exports in recent years have always reached a high value, leading to an increase in the demand for imported wood materials. The Covid-19 pandemic and the disruption of global supply have increased the price of imported wood materials and are expected to continue to increase in the near future, causing difficulties for businesses using imported raw materials. The price of imported wood in 2021 has reached US$300 per m3.

Meanwhile, the source of domestically planted forest wood is expected to be one of the important sources to replace the imported supply. However, so far there are still many limitations to create a supply of quality domestic plantation timber. Most of Vietnam's plantation timber is small wood, with 60-70% being used to make wood chips and pellets. Large quantities of timber, especially those with a forest management certificate (FSC), are still very limited. Mr. Phuc said that in order to create a domestic source of wood materials for domestic consumption and export processing, there should be breakthrough changes in mechanisms and policies on chain links and on land.

Mr. Nguyen Xuan Thuy, Director of Lien Khanh Company, which specializes in supplying wood materials for interior wood processing enterprises in Dong Nai, said that the supply of raw wood is under pressure from many sides. To be able to sustain, his business from many months ago had to actively reserve raw materials. Fortunately, in Dong Nai, there is a relatively large source of rubber wood material and recently liquidated to build Long Thanh airport, so the reserve is also relatively stable in the near future.

“The pressure of increasing the price of raw wood for production partners is present, but in the immediate future, businesses are not able to overcome because manufacturing companies also face many difficulties, moreover, wood is not a daily consumer product. Therefore, it is difficult to adjust as quickly as gasoline and other commodities," said Mr. Thuy.

 

Export value increases but profits decrease

Vietnam's export furniture wood in recent years has achieved impressive growth in value. However, the difficult problem of exporting enterprises in general and the wood industry in particular is that the high freight rates have "eroded" the profits of enterprises. The Covid-19 pandemic caused a disruption in the supply chain and a shortage of empty containers to carry goods. This has made international sea freight costs skyrocket recently.

In addition to the price of raw wood, other auxiliary components in wood processing such as screws and hardware also increased. A representative of a company specializing in supplying screws for wood furniture processing in Bien Hoa said that the price of iron and steel for processing will continue to be high. Supporting products for the wood processing industry may also have a new price level.

According to the interior wood processing enterprises, difficulties will continue because of rising sea freight rates and a shortage of empty containers. When it is too dependent on these issues, the wood production industry in general and exporting enterprises will continue to be affected by revenue and profit. The delivery time for foreign partners is therefore also longer, businesses are worried that they will not be able to meet the required deadlines, reducing competitiveness in international trade.

Phan Anh​

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