Wood Market Picks Up Speed in Vietnam

 

Wood Market Picks Up Speed
By Pham Quang Dieu & Nguyen Quoc Chinh
Thursday, October 29,2009,16:21 (GMT+7)

 

After a long period of robust growth, Vietnam’s wood export revenue plunged by nearly 10% for the first time. However, wood export has posted encouraging month-on-month performance, which has shown signs of recovery.

 

Currently, over 80% of the timber used to make wood products in Vietnam is imported, which spells trouble for the country’s wood export. In 2007 and 2008, Vietnam imported an average of 3.5 million cubic meters of timber annually, with sawn timber taking a lion’s share (2.28 million cubic meters, or 65%). This translates into over US$1 billion worth of imported timber, which caters mainly to the wood export sector.

 

Meanwhile, global demand, especially from main markets such as the U.S., Japan and Germany, exerts a tremendous influence on Vietnam’s wood export revenue. Since 2000, rising demand from these markets have boded well for Vietnam’s wood export earnings. In the first five months of 2009, orders from these markets plummeted year-on-year, Vietnam’s wood export ran into serious trouble. Wood export to the U.S., Germany and Japan nosedived by 37.23%, 18.3% and 17.17% respectively. Therefore, despite enormous efforts, Vietnam’s wood export generated merely US$982 million, down 10.4%.

 

Vietnam’s wood export hinges substantially on seasonal factors as wood processing entails several phases. 

• It takes three to four months to purchase timber and process it to meet orders. As these orders are usually placed in the first eight months of a year, the last four months often see export revenue peak.
• Figures from 2007 and 2008 showed that wood export earnings in the last four months were 12.57% higher than in the previous four months and 17.81% higher than in the first four months.
• Although the global financial crisis adversely affected wood export in late 2008, export value in the last four months were still 11.6% higher than in the previous four months and 21.07% higher than in the first four months.

Moreover, wood export policies implemented by Vietnam and wood-importing countries also play a part. For instance, in June 2008, the U.S. Congress passed the Farm Bill with stringent regulations on the origin of wood products imported into this country. In April 2009, the Lacey Bill on the origin of foreign wood and wood products in the U.S. also came into effect and imposed more challenges as the timber which Vietnam purchases from Myanmar, Laos and Cambodia is often of dubious origin.

 

On September 23, 2008, the Ministry of Finance isssued Official Letter 11270/BTC-CST to impose export taxes on products made of imported materials. Consequently, wood exporters saw export taxes rising from 0% to 10% and encountered numerous problems as wood export is most robust in the last four months of a year. Fortunately, in view of such trouble, the ministry issued Official Letter 965/BTC-CST dated January 21, 2009, which allowed those which had paid the taxes to get refunds and removed the 10% export tax on wood exports. The decision was immensely beneficial to wood exporters.

 

Signs of recovery

 

The third-quarter report on Vietnam’s wood export and prospects said that two factors which left profound impacts on this activity were

• imported materials and
• demand from main export markets.

 

In March 2009, global timber prices rose slightly while Vietnam’s timber import started inching up thanks to increasing numbers of orders. Problems in the forex markets were also tackled, so enterprises no longer worried about the shortage of foreign currencies used for purchasing timber. In May 2009, the U.S. economy also showed signs of recovery, and the housing market warmed up. Encouraging signals also emerged in Japan and Europe in July and August 2009. Therefore, Vietnam’s export revenue has fared better and posted month-on-month increase since May. At present, wood processing enterprises have received many orders. These indicate that Vietnam’s wood processing sector is on the path to recovery.

 

As a result, AGROINFO predicts that export prices for Vietnam’s wood products will follow global trends and fall by some 11.94% year-on-year. However, since demand for them from main markets has seemed to recover and the wood export sector has entered the peak season, it may reap revenue of US$2.8 billion in 2009, comparable to that in 2008.

 

 

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