Timber Exports Rebound

VOV | Mon, Aug 26, 2013 02:54:00 PM Share this on

Timber exports to the US, Britain, France, Japan, the Republic of Korea and China are rising rapidly, yet businesses fear that they are not able to cash in on bulk orders.

Rising global demands

High input costs recently forced timber processors in China to shift their production bases to other countries and Vietnam is one of their favourite destinations.

Do Thi Bich Sam, director general of Bao Hung Co Ltd in Binh Duong province, says the number of Japanese orders in her company has increased by 60% since the beginning of the year.

According to Sam, Japanese importers want to find timber processors outside China to sample new products and avoid risk as a result of China’s recent policies.

Last year, Bao Hung raked in US$5 million from timber exports and the figure is expected to rise to US$8 million this year.

Vietnamese woodwork is gaining a strong foothold in the global market thanks to their improved designs and quality.

Ngo Thi Hong Thu, deputy general director of Truong Thanh Wood Processing Joint Stock Company in Binh Duong province, says the shifting of orders from China to Vietnam proves more foreign importers have begun to eye high quality Vietnamese products at reasonable prices.

Other timber processors such as Tavico and Dang Long are planning to expand production to meet foreign orders which have increased by 30% to 50%, mostly from the US market.

Beyond capacity

Despite the positive signals, domestic processors fear that they cannot deliver shipments on time due to bulk orders and limited financial capacity.

“Although Vietnam’s major timber markets such as the US, UK, France, Japan, and the Republic of Korea have recovered strongly, we do not dare to sign short-term contracts, even six-month contracts, with importers because of our limited financial, human and material resources,” says Thu.

Nguyen Quoc Khanh, president of the Handicraft & Wood Industry Association of Ho Chi Minh City (HAWA), predicts that there will be a massive shifting of large orders from other countries to Vietnam next year and local businesses need to take advantage of this golden opportunity by improving production capacity and preparing qualified human resources.

HAWA is supporting its members in changing production models to cater to the taste of importers who prefer indoor to outdoor products.

FDI businesses have the upper hand

Statistics show that timber exports raked in US$2.91 billion in value in the first seven months of this year, a year-on-year increase of 12.65%. Yet most of the value fell into the hands of foreign direct investment (FDI) businesses.

FDI businesses, mostly Chinese and Taiwanese, normally maintain regular customers and receive large orders thanks to their financial capacity and large workshops.

Experts say Vietnamese timber processors have fallen victim to the global economic and financial crisis which started in 2008 and it has taken big businesses several years to get their operations up and running.

The Truong Thanh timber processor, which used to be one of the leading timber exporters in Vietnam, has worked hard to maintain a consistent level of operations for the past two years.

Financial capacity is the biggest hurdle to local businesses whose bank capital accounts for 70-80% of their total. A high ratio of bad debts has forced banks to impose quota on businesses, making it difficult for them to access capital.

Facts and figures:
* Vietnam is the sixth largest timber exporter globally
* 2012’s export value: US$4.67 billion, up 15.3%.
* 2013’s estimated value: US$5.5 billion, up 10%

Source: VOV