25th November, 2020

What has happened to Wood Market post-Covid19?

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Challenges that Vietnam's wood market is facing currently, and some of the long-term strategic solutions.

In recent years, Vietnam’s wood industry has been in a highlight for stable and growing manufacturing and export of wood and wood-related products to North America, Europe markets. It is believed that the advantages and growth potentiality of wood industry are very promising if Vietnamese wood enterprises have clear and well-adapted development strategies.

However, several major setbacks still exist to challenge Vietnamese wood enterprises. Labor shortage is one setback worth mentioning. Skilled labors graduated from universities and vocational training schools are currently insufficient to the wood industry, and they often change their professions to other more popular businesses. The second setback is the lack of manufacturing value chain in this industry. Vietnamese wood entreprises are often small to very small businesses who source raw materials and manufacture products on their own. Such ownership makes it difficult for specializing manufacturing chains, which are particularly important in developing value chains for the industry. And last but not least, raw materials are not meeting the demand, leading to unstable costs.

2020 has been a challenging year to all and of course, to Vietnam’s economy, for the pandemic Covid-19 has not been completely under control. Plus, the demand for wood materials in production is soaring, rainy season is unpredictably long, and heavy storms and floods have all led to veneer shortage and remarkable increase in production. Since August, wood companies from China have been purchasing vast quantity of veneer from Vietnam with exorbitant purchase price, more than 7% higher than market rate. Logistics also plays a role in escalating veneer production price, as the price of imported raw materials (melamine, phenol, NaOH, flour, etc.) has rocketed (up to 10-25%).

Since the market has re-opened, the abovementioned factors have challenged greatly the wood industry. And to secure the growth potentiality and to grow sustainably, wood industry needs every of its enterprises to co-operate with well-planned and meticulous strategies, as well as support from the Government, to settle those setbacks.

To settle the labor shortage, it is necessary to re-systemize the education programs, focusing on building key foresty education, and skilled professions. Close connections among enterprises and schools are also beneficial, since the schools are fully updated with the industry needs and the enterprises can easily access to skilled labors from an early stage.

To build and strengthen the multi-dimensional manufacturing value chains can help enterprises to grow strong and sustainably. Each enterprise with different strengths can support each other to utilize resources of raw materials, invest in quipment and machinery, production technology and effectively exploit large-scale markets.

In conclusion, to overcome challenges and seize the sustainable growth opportunities, Government and enterprises need to coordinate in specific and long-term strategies. And most importantly, Vietnam’s wood industry must work as a whole to develop.