Wood exports enterprises deal with inflation, carefully look for orders

Many wood export enterprises lack orders

In the context of high global inflation, the market purchasing power became weak for non-essential goods, causing a decrease in orders. This poses a challenge to the production and business activities of wood industry enterprises in the last months of 2022.

Research from the Vietnam Wood and Forest Products Association (Viforest) and local associations shows that nearly 80% of the wood processing businesses are forecast to have a decrease in revenue of 30% or more, orders had decreased 44.4%. In particular, there are businesses whose orders have decreased by 100%.

Director General of the General Department of Forestry Nguyen Quoc Tri said that the export of wood and wood products is facing many difficulties. The reason is due to the impact of the Russia-Ukraine conflict, making it difficult to transport goods, increasing costs, along with high inflation in other countries, causing a decrease in shopping demand. Faced with the above difficulties, it is forecasted that forest product exports in 2022 will reach about 16.3 billion USD, approximately the target set at the beginning of the year.

According to data from the General Department of Customs, in the first eight months of 2022, the export value of wood and wood products was estimated at $11.07 billion, up 6.2% over the same period in 2021. But exports of wood and wood products tend to slow down in recent months.

Specifically, the turnover in August was 1.35 billion USD, although it increased by 65% ​​over the same period last year, but only equal to July and lower than the figure of 1.5 billion USD in June.

The optimal solution for wood exporters

• The first solution to help businesses improve the situation of decreasing orders is to boost exports to other markets

Businesses still seek to boost furniture exports to Japan, Korea, and China – where inflation is less affected than other countries. Currently, about 54% of enterprises export to other markets such as Singapore, Japan, and South Korea.

With these markets, businesses see digital transformation as a means to smart production and sustainable development. Accordingly, businesses prioritize focusing on optimizing costs, increasing to labor efficiency, building brands, increasing revenue, and increasing customer experience.

Currently, the business only has orders to supply to the next two months, not to sign new orders. While the products that supply old orders are available, factories and factories gradually reduce their work and reduce operating capacity. In addition to factory operations to maintain customers and orders in markets with little decline, Sao Nam Company is also actively seeking new markets such as Canada and New Zealand with the expectation of making up for the decline. decline in the US market.

• Focusing on production for domestic customers: meeting the needs of home shopping at the end of the year

Experts in the wood processing and exporting industry assessed that in addition to the export market, the domestic market’s consumption demand is still vacant. Currently, domestic consumers have a great demand for home and office decoration as well as a series of residential projects that are being started construction, which are potential domestic customers for the domestic furniture industry. 

Currently, a number of enterprises are also actively producing wooden products for the domestic market. For many months now, grasping signs that the market will have fluctuations, export orders will be scarce, so businesses continuously promote promotions and discounts on items. Although purchasing power has improved, it is still low compared to enterprises’ expectations

In addition to efforts to exploit the potential domestic market, there are still many open markets in the world because of low import volume. However, now it is the lifeline of many businesses. According to information from the Handicraft and Woodworking Association of Ho Chi Minh City (HAWA), 47/52 member enterprises admitted that export orders had decreased in major markets, and only 5 enterprises had increased orders. from 10% to 30%. The current savior is the business that actively seeks and exploits other small alternative markets.

• Increasing production of wood pellets to supply potential market

Due to the war between Russia and Ukraine, the price of energy and gas has increased, so the EU, Japan, and Korea… increased imports of pellets and wood chips for fuel, so the price of pellets and wood chips increased by 150 – 200%. This is a great opportunity for the wood export industry in Vietnam.

Forecast for the fourth quarter and early 2023

It is forecasted that in the last 3 months of the year, the wood industry will face many difficulties such as trade competition, the impact of the Russia-Ukraine conflict, freight rates, inflation…

“Currently, inventories of importers are still high. At this time, wood exports enterprises have reduced orders in 2022 and have not received new applications for 2023, and must cut labor,” Mr. Tran Quang Bao said.

The above information includes updated news and information collected from: “The report of the wood industry in the third quarter of 2022”. The full report will provide customers with analytical information on macroeconomics, information on raw materials, interior plastics and forecasts on the wood industry.

In addition, VIRAC can research and make customized reports to meet the special and in-depth needs of customers. Register for the topic HERE.

VIRAC provides a variety of research reports on many economic sectors in Vietnam; including analysis from overview to details of the market, products – services according to the needs of customers in many different fields.

Vietnam Industry Research and Consulting Joint Stock Company are confident to be a reliable companion of your business on the way to conquer the Vietnamese market.