Recently, Michael Hermens, managing director of APP Timber Group, a timber import certification solution, expressed his view on furniture production in Southeast Asia, which he believes has slowed down overall.
According to him, although most orders are prepaid or in a state that has not yet been shipped, June is the beginning of a large number of cancellations by Vietnamese customers.
A Brazilian supplier said they had many containers of pine sawn timber cancelled and many were on their way to Ho Chi Minh City or stuck at the Ho Chi Minh City port.
European and American suppliers exploded
As the largest mid-end furniture exporter in the US and Europe after China, Vietnam has received a large number of orders in 2020 and 2021 when the epidemic broke out globally. However, the mid-range market now faces the problem of reduced user demand.
Many U.S. and European suppliers' warehouses and stores are full or even full. Many of these suppliers have inventories that can hold sales for at least half a year. As a result, these foreign buyers have seen a large number of cancellations.
Michael said the general optimism in the market over the past two years has turned. Affected by the rapid growth of inflation, the purchasing power of furniture is shrinking.
And this situation is not only in Vietnam, Malaysia and Indonesia have been affected by the "order shock". In Vietnam and Malaysia, factories that mass-produce mid-to-low-end furniture were hit the hardest by the massive order cancellations.
In stark contrast to the influx of orders in Vietnam at the beginning of the year, a large number of orders were cancelled due to inflation and sharply rising material costs.
Companies such as Nanxing Vietnam, whose marketing director, Ms. Tran, said most markets had reduced orders for imported wood products. Among them, the U.S. market suffered the largest decline, with a decline of 30%-40% over the same period.
At the same time, Vietnam also began to adjust the export market of medium-height furniture at the beginning of the reduction of orders. Although from January to August this year, Vietnam's timber and its products to Australia increased by 23.99%, but it was only 135.4 million US dollars.
Exports in July were estimated at US$1.41 billion, down 5.5 percent from June and down 1.6 percent year-on-year, according to a report by the General Administration of Forestry (MARD) of Vietnam’s Ministry of Agricultural Development. This is the second month of a slowdown in exports of wood and its products.
And a quick survey of 52 timber companies by the Ho Chi Minh City Wood Processing and Craft Association (HAWA) in Vietnam showed that most of the companies experienced a decline in revenue in the US, EU and UK markets.
47/52 of the member companies admitted that export orders in major markets decreased, and only 5 companies saw orders increase by 10% to 30%.
In the entire Southeast Asian countries, Indonesia, which mainly exports low-end and medium-end furniture, maintained growth from January to August this year. Among them, exports to the United States rose 15% to $1.63 billion. Exports to the European Union and the United Kingdom rose 17 percent to $868.4 million.
But for Indonesia, the largest exporter, for my country, it fell 17% to US$2.08 billion. Overall growth is also slowing.
It is not as easy for enterprises to transfer the market as to open up new roads, and from the perspective of the entire furniture market, there are more difficulties faced.