To ensure the raw material supply for production

The respiratory infections caused by Covid-19 is affecting exports of a number of industries, including timber. However, businesses have been actively seeking alternative sources of raw materials, anticipated market opportunities for stable development.

Production activities at Sao Nam Wood Trading and Manufacturing Company.

To limit negative impacts from disease

Trade relation between Vietnam and China is facing difficulties due to the impact of Covid-19. Domestically, the Covid-19 is causing difficulties to many manufacturers in terms of raw materials that must be imported from China. Businesses are trying to limit the damage of this factor.

Currently, timber enterprises of Vietnam secure 70% domestic materials, the rest are mainly imported from Africa, USA, Canada, New Zealand... On the other hand, buyers choose or change to designs made of domestic materials. Some raw materials and auxiliary materials must be imported from China in small quantities for domestic production of wooden furniture can be replaced by domestic supplies. Thus it does not significantly affect the production process or export turnover of this industry.

According to Le Van Dep, Deputy Director of Van Viet Joint Stock Company (Tan Uyen Town), timber industry is different from apparel and footwear, because their raw materials are not too dependent on outsiders. Currently, auxiliary materials for wood industry imported from China account for only about 10%. Thus the impact of the epidemic on the industry is not great, because in fact, many businesses in Vietnam can produce raw materials, chemicals for wood processing by themselves.

Meanwhile, Tran Thanh Trong, Chairman of Binh Duong Mechanics and Electrical Association, said that enterprises in electromechanical industry exported to big markets such as Europe and Japan. But for the domestic market, electromechanical enterprises have few opportunities to promote trade promotion, especially FDI enterprises. Businesses expect the authorities to create the most favorable conditions to actively connect and introduce their production strengths to participate in the domestic supply chain.

Wood industry is in the early stage

In 2019, Vietnam's timber export achieved strong growth thanks to taking advantage of opportunities from major export markets, with a growth rate of over 18%. According to experts, if Vietnam has good epidemic control, wood enterprises proactively respond and exploit opportunities, they will fulfill the export target of 20 billion USD by 2025.

Dien Quang Hiep, Chairman of Binh Duong Furniture Association (BIFA), General Director of Minh Phat 2 Company, said in 2019 timber export of the whole country reached the target of USD 11 billion as order placed by the Prime Minister. In the coming time, this industry still has rooms for development, with estimated export turnover in 2020 could reach 12 - 13 billion USD, in 2025 could reach 20 billion USD. This is also the opinion of Ministry of Industry and Trade when believe that in 2020 the wood industry could fully reach the export milestone of 12.5 billion USD. Because in addition to the largest market the US, exports of wood and wood products have opportunities to grow strongly in some other important markets such as Japan, the United Kingdom, Canada, Germany, the Netherlands...

Do Thi Kim Loan, General Director of Sao Nam Wood Trading and Manufacturing Company (South Tan Uyen Industrial Park), said that the company got orders for the whole second quarter of 2020. In 2020, it is forecasted that the wood industry would have many advantages. For the US and European markets, plank flooring exports over the past year grew well. In addition to the increasing demand, there is also advantages of FTAs, like CPTPP and the upcoming EVFTA.

The European Union is one of the main export markets for Vietnam's timber industry. In the coming time, when EVFTA is become effective, Vietnam's wood products will become more attractive, thanks to the reduction of tariff barriers as scheduled. At present, many timber enterprises that have large capital, good management capacity, bravely apply new science and technology is developing auxiliary industries for wood production and processing. Sao Nam Company is investing in a modern production line to provide plank flooring combined with stone materials for the US market and the domestic market.

However, according to Ms. Loan, in 2019 Vietnam's timber industry had made good use of opportunities from US-China trade tensions, then the market during the Covid-19. But businesses need to reassess the reality of their production situation and supply capacity when receiving orders. If many requests are received at the same time, factories must take into account the capacity and time to regulate and prepare the production, otherwise it will cause great damages, when contracts are broken or delayed.

Reported by Tieu My - Translated by Ngoc Huynh