Early 2021 wood export: mixed feelings

Large number of orders, never-ending workload

This time last year, wood companies encountered severe difficulties brought by COVID-19 pandemic. This year represented a stark contrast.

According to Ms. Le Thi Xuyen, CEO of the Thuan An Wood Processing Joint Stock Company (located in Binh Duong province), in February 2020, even before the COVID-19, orders were weak. Things got worse in March. In April and May, customers requested to cancel their orders, or placed them with decreasing frequency: every 2 weeks or 2 months. The company had had few work for 1.5 months, thus had to furloughed its workers. It was not until early June that the orders rebounded.

In sharp contrast, since the beginning of this year, the company has been flooded with orders from foreign exporters, which increased by 30% from this period last year. The flood has been so great that the company feels it is unable to fulfil, although everyone is on overtime, even on Sundays.

Almost all wood companies received more orders than this time last year, Ms. Xuyen added.

According to wood importers, as people work from home to avoid catching or spreading the coronavirus, huge demand in the home office area was created. Consumers now have time to look for furniture and wood products on the internet. These factors have boosted the demand for the products in various markets.

In addition, the U.S. – China trade war helped re-route orders to Vietnam from China.

This positive achievement is proved by export statistics. According to the General Department of Customs, in the first 2 months of 2021, the export value of wood and wood products reached US$ 2.27 billion – a 40.3% surge from a year earlier. The latter is at US$ 1.76 billion, appreciating by 49.8% compared to last year’s same period.

Still the stumbling blocks

Despite this favorable situation, the industry ran into some stumbling blocks.

The first block is the empty container scarcity. According to Ms. Le Thi Xuyen, currently, packaged goods equivalent to 38 containers are taking up her company’s warehouse instead of being delivered to foreign customers due to a severe shortage of empty containers. The company is considering a plan to rent another warehouse to make storage for future production.

The second block is soaring rates for sea freight, which takes importers and customers time to decide on shipping companies that offer affordable services, then recommend to Vietnam exporters. However, such companies will receive a great deal of orders in this context, which makes booking a no easy task.  

To cope with the situation, Thuan An often has to pay extra to get containers as soon as possible, although their products are already exported mainly under FOB agreements. Many other companies in the industry are also resorting to this alternative.

Rising prices of multiple wood types and material for its processing, both foreign and local, proved another block. Just a 10 – 30% increase would exert a profound impact on the wood processing sector.

According to the Industry and Trade Information Center - Ministry of Industry and Trade (MOIT), earlier this year, the price of imported wood material shot up, thereby boosting wood import turnover. In the first 2 months of the year, the turnover of imported wood and wood products was estimated at US$ 448 million, increasing by US$ 116 million (34.8%) as compared to the same period in 2020. Out of that US$ 116 million, 71 million was due to the growth in wood import and 45 million was owing to price rise.

MOIT’s Export – Import Agency said that despite the pandemic, in the first two months of 2021, the exportation of Vietnamese wood and wood products sustained great growth momentum.

In that, wood products are the main export item, accounting for 77.7% of the total export value of wood and wood products of Vietnam. This indicates that the structure of wood and wood products continues to shift in a positive direction: export of processed products going up while that of raw materials going down.