HCM City (VNS/VNA) - Contrary to full orders atthe beginning of the year, Vietnamese wood and wooden furniture enterprises arecurrently facing many difficulties due to the cancellation of orders bycustomers because of inflation in countries such as the US and the EUand the sharp increase in input material costs.

In fact, Vietnam’s wood industry is seeing declining sales overseas.

The export value in July was estimated at 1.41 billion USD, down 5.5% againstJune and down 1.6% year-on-year, according to a report of the GeneralDepartment of Forestry under the Ministry of Agriculture and Rural Development(MARD).

This was the second month that the export of wood and timber productsdecelerated.

Earlier, figures from the General Department of Customs showed the exportturnover of wood and wood products in June was down nearly 11%year-on-year. Through the first seven months of the year, wood and woodproduct exports were 10.4 billion USD, up just 1.3% year-on-year.

According to market insiders, the wood industry will face a big challenge dueto a decrease in export orders in the latter half of this year.

A quick survey on 52 timber businesses conducted by the Vietnam Timber andForest Products Association (Vifores) in collaboration with Forest Trendsshowed that most companies witnessed decreasing revenues in the US, EU and UKmarkets.

Thirty-three out of 45 firms exporting to the US said their revenues decreasedby nearly 40% compared to the first months of this year. A similar trend isseen in the EU and the UK, with two-thirds of the surveyed enterprisesreporting revenue drops of over 41%.

Moreover, about 71% of businesses said that orders will continue to decreasetowards the end of the year. Under the current market situation, 44% ofbusinesses expected revenue will fall by about 44% for the whole year.

Phung Quoc Man, general director of Bao Hung Wooden Furniture Export Company,said the number of orders canceled in July was more than 30%. In response tothe decline in purchasing power in the EU and the US markets, the business islooking to boost furniture exports to Japan and the Republic of Korea, whereinflation has had less of an impact than in other countries.

There are also a few businesses that turn to the domestic market in orderto maintain production, Man said.

According to the Vifores Chairman Do Xuan Lap, Vietnam's wood industry isintegrating deeply into international markets so high inflation andtightening credit policies in response to rising inflation in major markets isdriving down demand for non-essential products including wood and woodproducts.

“High inflation in major markets such as the US, EU and UK is having a directnegative impact on the production and business activities of wood processingenterprises. They are currently facing many difficulties in terms of capital,labour costs and input materials,” Lap said.

Switching or finding new markets is not easy, but this helps wood andwooden furniture manufacturers minimise losses when a series of orders arestretched, reduced, or even canceled by international partners, Man said.

In addition, in order to reduce the import price of raw materials to increasecompetitiveness, experts said wood businesses should diversify their supply oftimber, reducing the proportion of imports from tropical countries andincreasing the proportion from low-risk sources.

Vietnam has become the world’s sixth largest exporter of wood and woodenproducts with more than 4% of the global market, second largest in Asia, andbiggest in the Southeast Asia, putting it under scrutiny from major tradingpartners.

Besides sourcing locally, Vietnam also imports raw timber, including fromtropical countries. The volume of tropical wood imported annually is around 1.5million cubic metres, or 30% of total imports, mostly from Africa.

According to statistics from the General Department of Customs, despite theimpact of the COVID-19 pandemic, exports of wood and wooden products grew by17.6% last year to 14.12 billion USD.

Vietnamese wood and wood products are present in more than 163 countries.

Vietnam is targeting 20 billion USD in total timber exports by 2025, anincrease of more than $9 billion compared to now.

The value of timber and wood products for domestic consumption will reach $5billion in 2025 and over $6 billion in 2030.

The industry aims to have more than 80% of wood processing and preservationestablishments equipped with advanced technology, and all timber and woodproducts for export and domestic consumption will be made from the legal rawmaterial of timber.

By 2030, the domestic wood processing industry will become an importanteconomic sector and develop a reputable brand for Vietnamese wood products indomestic and export markets.

Vietnam strives to become one of the leading countries in the world'sproduction, processing, and export of timber and wood products.

Another task of the industry is to develop infrastructure andexpand production scale. Specifically, the industry will form fiveforestry zones with high technology applications to attract investment fromwood processing enterprises and enterprises producing auxiliary materials.

Vietnam will build an international furniture exhibition centre and encouragethe development of research centres to design wood products per the needs ofconsumers./.