Major challenge - wood exports miss growth target

Vietnam's wood export industry faces major challenges

On December 21, 2023, the Vietnam Timber and Forest Products Association (VIFOREST) along with member associations (HAWA, FPA Binh Dinh, BIFA, DOWA), and affiliated associations (Chip, Pellets, Plywood) collaborated with Forest Trends to organize a seminar on "Sustainable Development and Challenges for the Wood Industry."

Market gradually recovers but risks remain

At the seminar, Mr. Do Xuan Lap, Chairman of the Vietnam Timber and Forest Products Association, presented data from the General Department of Customs. Accordingly, export turnover in the first 11 months of 2023 reached USD 12.1 billion, equivalent to 82.5% of the same period in 2022. The annual export turnover for 2023 is projected to reach USD 13.5 billion, down 15.5% compared to the previous year.

Mr. Lap noted that although the market shows signs of recovery, 2024 still poses many difficulties. Besides market challenges, the industry also faces several issues affecting sustainability.

Challenges for wood product exports

1. Strict regulations from major markets

Major export markets are increasingly demanding stricter legality and sustainability of products. The EU's anti-deforestation regulation (EUDR), effective from the end of June 2023, requires imported products to ensure legality and not cause deforestation.

2. Low carbon emission requirements

Both domestic and export markets require low carbon emissions throughout the supply chain. This makes high-carbon content products less competitive.

3. Risky sourced imported wood

Vietnam imports about 1.5 – 2 million m³ of round wood and sawn wood annually from tropical countries, accounting for 30-40% of the total imported raw wood. This not only negatively impacts the image of Vietnam's wood industry but also loses the opportunity to use low-risk imported wood and domestically planted forest wood.

According to Dr. To Xuan Phuc, a specialist from Forest Trends, 2023 has been a difficult year for Vietnam's wood industry. The demand for goods, especially wood products, has dropped sharply. Some major global wood product importers have gone bankrupt, forcing many Vietnamese wood businesses to scale down production, with some having to shut down.

In the first 10 months of 2023, Vietnam's wood and wood product export turnover reached over USD 10.67 billion, down 19.2% compared to the same period in 2022. Although exports to major markets declined, export turnover to India and Indonesia increased significantly.

The US remains the largest market for Vietnam's wood industry, with a turnover of over USD 5.7 billion in 10 months, down 21.5% compared to the same period in 2022, accounting for 53.43% of the total export value of wood and wood products.

China is the second-largest market, with a turnover of USD 1.43 billion, down 23.2% compared to the same period in 2022, accounting for 13.38% of the total export turnover of wood and wood products. Japan reached USD 1.38 billion, down 11.3%, accounting for 12.92%. South Korea ranked fourth, with USD 666.53 million, down 17.8%, accounting for 6.25%. The EU ranked fifth, with a turnover of USD 341.16 million, down 34.5%, accounting for 3.2%.

New regulations impact wood export industry

The Vietnam Timber and Forest Products Association stated that the EU introduced new anti-deforestation regulations (EUDR) in June 2023. This regulation requires businesses to accurately identify the geographical location of production lots. The EU also imposed new limits on formaldehyde in consumer products.

The US has also increased the frequency of trade defense investigations and compliance with labor regulations for the wood industry. Japan requires wood products exported to its market to have sustainability certificates.

Mr. Tran Quang Bao, Director of the Forestry Department, stated that Vietnam has completed the legal framework and regulations to implement the Vietnam Timber Legality Assurance System (VNTLAS) and Agreement 301 (USA). Circular No. 26/2022/TT-BNNPTNT on the management and traceability of forest products replaced Circular No. 27/2018/TT-BNNPTNT and took effect in January 2023.

In Summary

The year 2023 brought many challenges to Vietnam's wood industry, from declining demand in major markets to strict regulations on the legality and sustainability of products. However, the wood industry still has opportunities if it can adapt to new market requirements. Improving the legal framework and strengthening the management of forest product origins are essential steps to ensure the industry's sustainable development in the future.