Vietnamese furniture makers hit by dwindling timber supplies

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% of all wood used commercially around the world.

About 67% of wood used in Vietnamese products is domestically sourced, mainly from defunct rubber plantations, while the remaining 33%, 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.

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

This clearly presents a supply problem.

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

“Last year, Vietnam exported more than US$7 billion worth of wood products, while global demand was estimated at US$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% of them are small-and medium-sized companies. These companies have struggled to fulfill large orders from retailers in the US, 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% 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%, 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 US, Chinese furniture companies are flooding into Vietnam, relocating their manufacturing facilities and exporting to the US from here.

Since 2015 the US 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 US is currently imposing a tariff of between 55% and 120% 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 US anti-dumping actions.

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