Vietnamese furniture makers hit by dwindling timber supplies

 A worker at a plant that makes wood products for the country’s furniture industry. Photo by Reuters

Valuable wood that could be used by local carpenters is being shipped overseas.

Many Vietnamese furniture makers are struggling to win large orders from global retailers due to a significant shortage of wood.

It is estimated that local furniture firms use about 30 million cubic meters of solid wood and wood-based board materials each year, which translates as about 2.2 percent of all wood used commercially around the world.

About 67 percent of wood used in Vietnamese products is domestically sourced, mainly from defunct rubber plantations, while the remaining 33 percent, translating into around 10 million cubic meters, must be sourced from overseas.

In the meantime, data released by the Agriculture Ministry showed that last year Vietnam exported 8 million cubic meters of solid wood to neighboring China.

This clearly presents a supply problem.

Vietnam’s furniture exports have been growing steadily by 10-15 percent in recent years, said To Xuan Phuc, an industry expert from non-profit organization Forest Trends.

“Last year, Vietnam exported more than $7 billion worth of wood products, while global demand was estimated at $400 billion. There is potential for more growth,” said Duong Phuong Thao, a senior official from the trade ministry.

However, given the continuing high demand for timber, local furniture companies are faced with a significant shortage of materials.

Vietnam currently has 4,000 furniture makers and exporters and 93 percent of them are small-and medium-sized companies. These companies have struggled to fulfill large orders from retailers in the United States, the European Union and Japan,” said Huynh Van Hanh, vice chairman of Ho Chi Minh City’s Association of Handicraft and Wood Businesses.

Only 7 percent of Vietnamese furniture makers have managed to win large orders from global retailers, Hanh added.

Local companies believe that the government should throw its considerable weight behind a plan to develop a sustainable forestry system that can be expanded as demand for wood continues to grow.

Vietnam may hike tariffs on solid wood exports to 30–35 percent, the same level Cambodia and Thailand apply, to promote better forest management, end deforestation and help with timber supplies, said Huynh Kim Bau, assistant to the general manager of Saigon Furniture.

The Agriculture Ministry plans to develop 200,000 hectares of certified sustainable forests this year, and it is forecast that Vietnam will have 500,000 hectares of certified forests by 2020.

Dominance of Chinese furniture makers

A shortage of solid wood and wood-based materials is not the only problem facing Vietnamese furniture exporters.

Local firms mainly do outsourcing works for foreign furniture suppliers, most of which are Chinese, Hanh said.

Official statistics show that a third of foreign-invested companies in Vietnam’s furniture industry are Chinese.

In an attempt to dodge anti-dumping tariffs imposed by the U.S., Chinese furniture companies are flooding into Vietnam, relocating their manufacturing facilities and exporting to the U.S. from here.

Since 2015 the U.S. has imposed import tariffs on Chinese-made furniture including beds, nightstands and other wooden wares in an attempt to protect its domestic manufacturers from Chinese “dumping”, or the export of goods at unfairly low prices.

Ngo Sy Hoai, vice chairman of the Professional Association of Timber and Wood Products (Vifores), said the U.S. is currently imposing a tariff of between 55 and 120 percent on Chinese furniture, but there is no tariff on furniture imports from Vietnam.

Local woodwork factories in Vietnam are concerned that their businesses will suffer if they act as a shield for Chinese furniture companies from U.S. anti-dumping actions.

The fact that Vietnamese manufacturers may come under the radar of American anti-dumping investigators is obviously unwelcome as the U.S. has become Vietnam’s largest buyer. Vietnam’s furniture exports to the U.S. have reached more than $2 billion per year, equivalent to 30 percent of all exports.

By VnExpress