According to Vietnam News, rising production costs have squeezed profits for Vietnamese furniture makers, leading to price hikes. After ocean freight rates have long reached unprecedented levels, the recent rise in oil prices has further pushed up freight rates, which are now five times their pre-pandemic levels.
In addition, the Russian-Ukrainian conflict has led to a reduction in the supply of wood raw materials from Russia. With the tight supply of wood and wood products, Vietnamese companies will have to compete with international companies to import wood, and some companies directly choose to suspend imports.
Although Russia and Ukraine are not the main partners of Vietnam's timber import and export, the conflict between Russia and Ukraine has seriously affected Vietnam's timber imports. In 2021, Vietnam’s timber imports from Russia will be worth only about US$55 million, equivalent to 2% of Vietnam’s total timber imports. Vietnam’s exports of wood and wood products to Russia are worth about US$7.3 million, equivalent to 0.05% of Vietnam’s total exports of wood and furniture products. Vietnam's timber imports and exports to Ukraine are also very small.
Although Vietnam does not directly import large quantities of wood materials from Russia, the scale of indirect imports of raw materials through other markets is not small.
At present, China is the largest export market for Russian timber materials, and exports to China account for about 50% of Russia's total annual exports of logs and sawn timber. After importing from Russia, Chinese timber companies process and export to other markets, including Vietnam.
Over the years, wood originating in Russia has been imported from China to Vietnam in the form of processed wood products, accounting for a large proportion of Vietnam's total imported wood materials. On average, Vietnam imports more than 70,000 m³ of sawn timber and nearly 200,000 m³ of plywood from China each year, including a variety of woods originating in Russia.
The Russian-Ukrainian conflict could reduce Russia's supply of logs and wood products and cause global shortages. In the short term, part of the shortage can be solved by increasing imports of EU and US wood products that are similar to Russian wood species. However, a shortage of log supplies will intensify competition among importing countries, including Vietnam.
Vietnam imports between 5.5 and 6.5 million cubic meters of logs every year, according to the wood industry organization FOREST. Rising raw material prices, coupled with increased transportation costs, have increased import costs, resulting in severe compression of profit margins.
In a report by Vietnam News, Phan Van Phuoc, head of furniture company Tan Phuoc, predicted that the shortage of timber supply will continue for at least a few months. He said furniture companies had to raise product prices to stay afloat and would not import wood in the short term due to high costs.
Tran Quoc Manh, general manager of Saigon Trade and Production Development Joint Stock Company, said: "Many wood product manufacturers have had to curtail production amid high fuel costs and high shipping costs. Businesses are reluctant to sign new contracts due to cost uncertainty."
Faced with these problems, Dongnai Timber and Handicraft Association Chairman Le Xuan Quan has urged the authorities to introduce policies to stabilize freight rates and called on local forest farmers to work closely with wood processing companies to develop sustainable wood sources for forestry to reduce the cost of imported materials. rely on.
