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Vietnam’s wood furniture industry on the rise... with risks

Vietnam’s wood furniture industry on the rise... with risks

Friday 01, 04 2022
It is anticipated that in 2022, world furniture demand will still be on the rise. Vietnam’s wood furniture industry, thereby, has a great chance of development. However, the chances are presented with risks.

Orders received until third quarter

Mr. Nguyen Chanh Phuong, Vice Chairman of the Handicraft and Wood Industry Association of Ho Chi Minh City (HAWA) shared information on Vietnam’s wood furniture industry at the press conference about Vietnam Furniture Matching Week (VFMW) 2022.

wood furniture industry

In the first 3 months of 2022, the export turnover of the wood furniture industry reached 3.94 billion USD, up 3% over the same period in 2021. Not only were orders filled until the end of the third quarter, but some companies also had orders filled until the end of 2022.

It is anticipated that in 2022, world furniture demand will still be on the rise. In March, the growth rate showed signs of a slight decrease, but it was still a high number compared to 2020.

If the average export turnover maintains at about 1.5 billion USD/month, Vietnam’s wood industry's plan of reaching 16.5 billion USD by the end of 2022 is feasible.

However, according to Mr. Phuong, the recent fluctuations in world politics are causing significant disturbances to the supply chain, the supply of raw materials, and especially the logistics costs.

Citing the difficulties in logistics costs, Ms. Duong Thi Minh Tue, sales director of Minh Duong Wood Company, said that the company has orders to the US and Europe until the end of the third quarter of 2022 and is still receiving orders for the fourth quarter. However, logistics costs are increasing rapidly, so product prices are very high, many orders are closed before raw material price fluctuations. The logistics costs are eating into companies’ profits.

As for raw materials, the increase in oil prices led to input materials prices increasing. If there are to be any additional disruption or additional costs of the supply chain, the wood industry production would be directly impacted and, in turn, affect the wood furniture segment. The price of wood increased by 55% compared to before the conflicts broke out.

materials prices

The shortage of raw wood continues. Companies stated that the price of wood is increasing every day, and the price may be pushed even higher. That causes many business leaders to recalculate their production chains.

According to Ms. Bui Thi Thanh An - Deputy Director of the Department of Trade Promotion (Vietrade), in 2021, the wood industry will be a bright spot in the national economic growth picture.

Wood furniture exports may lose top spot

Wood and wood products exports are one of the eights industries with an export turnover of over 10 billion USD in Vietnam, and the industry is rapidly growing. However, arising difficulties are hindering wood exports.

Over the past 10 years, from 2010-to 2021, the export turnover of wood, wood products, and furniture has increased more than 4 times, from 3.44 billion USD in 2010 to 14.12 billion USD in 2021.

Total revenue of furniture manufacturing enterprises also increased rapidly from 3.86 billion USD in 2010 to 11.18 billion USD in 2020, nearly 3 times after 10 years.

It is forecasted that the global furniture market still has great potential with a compound growth rate of 3.75%. In 2020, Vietnam only accounted for 2.58% of the total global furniture market size, reaching 509.8 billion USD. The growth potential is still great. By 2027, it will be about 650 billion USD, and the growth will shift to the Asia-Pacific region.

Forecasted

Despite much potential presented, wood furniture exports still face risks due to a lack of concentrated raw material areas. The afforestation area certified for sustainable management accounts for 8.4% of the total planted forest area of the country, about 307,000 hectares.

In addition, the cost of imported wood and the cost of exported goods is a problem that increases prices and reduces the competitiveness of Vietnamese enterprises.

The supply of legal timber from abroad has not been controlled in practice, so there is a potential legality risk. Therefore, the possibility of commercial fraud of enterprises by using goods imported from China, but posing as Vietnamese originate is a huge potential risk for the industry.

 

Compiled by VietnamCredit

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