Wood product processors need to restructure production due to COVID-19

Wood product processors need to restructure production due to COVID-19

The restructuring would help enterprises change to suitable production and business plans with the existing situation and prepare resources to continue production and business as soon as the pandemic ends.

Those were mentioned at the ministry’s official letter sent on Tuesday to the Viet Nam Timber and Forest Product Association (VIFOREST) and wooden and forestry product processing enterprises to promote production, processing and export for wooden and forest products during the COVID-19 pandemic.

The ministry said the COVID-19 pandemic is spreading around the world and that has had great impacts on Viet Nam’s economic sectors, including the timber and forestry processing industry.

It has suggested associations and enterprises report difficulties due to the COVID-19 pandemic to the People's Committees of the provinces and cities where the enterprises are located, as well as relevant ministries and sectors. They should also propose their solutions to the State and local authorities to remove those difficulties and maintain stability in production.

Meanwhile, the ministry would still monitor production and business of wooden and forestry products at home and abroad. It would collect recommendations of the association and those enterprises to submit to the Government to have support for them from the Government’s support packages. The packages were issued early this month for domestic businesses to deal with difficulties during the pandemic.

VIFOREST has forecasted that Viet Nam would see strong reduction in exports of timber and wooden products in the next three months due to COVID-19.

According to the association, five major markets account for nearly 90 per cent of Viet Nam's exports of timber and wood products, including the US (accounting for 50 per cent), Japan (13 per cent), China (12 per cent), the EU (8 per cent) and South Korea (8 per cent).

Now, some seaports in the US are closed to imported goods while wooden furniture is not considered an essential good, said Nguyen Liem chairman of the Binh Duong Wood Processing Association and general director of Lam Viet Joint Stock Company.

Meanwhile, many EU countries have announced lockdowns to prevent the spread of COVID-19 so demand for non-essential goods, like wooden products, would reduce in the following months.

Therefore, many enterprises in the export markets, especially in the US and EU, two of the key export markets of Vietnamese wooden furniture, have announced to Viet Nam’s suppliers to stop new orders or delay imports of Vietnamese wooden products and even stop imports under signed contracts, according to Liem.

That situation has happened for almost all factories in Dong Nai and Binh Duong provinces because foreign partners said they must close stores and distribution centres due to the spread of COVID-19 pandemic in those countries.

It has brought losses to Vietnamese timber enterprises because they have prepared equipment and materials to produce export goods according to the signed contracts. Now they must stop as required by the importers, he said.

The difficulties in exporting to the US and EU have made many local enterprises consider switching to the domestic market, he said. However, it is not easy because domestic customers have different demands, requiring different production technologies.

On the other hand, the distribution system is not available on the domestic market, he said.

The existing difficult period is expected to last for the next 3-6 months or even longer, so the businesses have focused on reducing production costs, he said.

The association has also forecasted that Viet Nam's export of timber and wooden products will decline sharply in the next three months.

According to MARD, in the first two months this year, Viet Nam gained a year on year increase of 13.5 per cent in export value of timber, wooden and forestry products to US$1.67 billion, including $1.53 billion from timber and wooden products, up 10.2 per cent. Main export markets included the US, Japan, China, South Korea and the EU.

Of which, exports to China still reached a growth rate of 19.1 per cent in the first two months because the exports were shipped mainly by sea so the pandemic did not affect them.

Viet Nam expects to gain $12 billion from the timber and wooden product exports this year.

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