Producing wooden furniture for export to the EU market at WOODSLAND Tuyên Quang JSC. If the businesses comply with the EU regulations, they can expand the market in EU countries. — VNA/VNS Photo
The wood industry market shows some signs of recovery, however, 2024 still poses some potential difficulties for the industry.
Growth is expected to slow by about 10 - 12 per cent compared to the last quarters of 2023.
Đỗ Xuân Lập, chairman of the Việt Nam Timber and Forest Products Association (VIFOREST), gave this forecast at a seminar on sustainable development and challenges for the wood industry held by VIFOREST, along with various associations and member organisations, and Forest Trends in Hà Nội on Thursday.
This year is a challenging year for Việt Nam's wood industry. Consumer demand in main export markets such as the US and EU has dropped sharply, leading to a decline in orders. Many businesses have had to reduce production, and some businesses even had to stop production.
Therefore, according to Lập, Việt Nam’s exports of wood and wooden furniture will reach only about US$13.5 billion in 2023, down 15.5 per cent year on year.
Nguyễn Liêm, chairman of the Bình Dương Furniture Association (BIFA) and founder of Lâm Việt Furniture, said: "In the third and fourth quarters of this year, export orders have increased due to inventory reductions in the US and high demand EU for the Christmas and New Year holidays. This signals it is not possible to evaluate the prospects for 2024."
Nguyễn Chánh Phương, vice chairman and general secretary of the Handicraft and Wood Industry Association of HCM City (HAWA) also said that the businesses have had recovery in export orders to have enough jobs for workers. Some of them have started to purchase raw materials and prepare for production to meet demand in next year's peak season.
He said the recovery of the wood industry being sustainable or not, will depend on the fair season in March-April 2024.
Việt Nam's wood product processors must adapt to overcome existing difficulties, including new regulations in key export markets, according to VIFOREST.
Ngô Sĩ Hoài, VIFOREST vice chairman cum general secretary, said that after many years of achieving breakthrough growth and turning Việt Nam into the world's top exporter of timber and wood products, enterprises in the domestic wood processing industry are facing a difficult year.
Currently, global markets have not shown many signs of a quick recovery in purchasing power for wood products, especially the US market which has often ordered over 50 per cent of Việt Nam's export wood products.
Most wood processing enterprises in Việt Nam have received orders again, but they are still facing many difficulties and are operating at moderate production levels.
The world situation is still too uncertain, so the domestic wood processing industry's prospects for recovery and growth in 2024 will be very challenging, Hoài said.
"The five largest export markets for Việt Nam's timber and wood products next year are likely to still include the US, China, Japan, South Korea, and the EU. Therefore, the wood industry will have to make a lot of effort to maintain its position and market shares, because these markets have many new policies and regulations that can cause difficulties for local businesses," Hoài told the Đại biểu nhân dân (People's Representatives) newspaper.
For niche markets, the wood processing enterprises certainly will not ignore opportunities to enter those markets, including strict markets. This will minimise risks in export.
In May 2023, the European Union (EU) issued the EU Deforestation-Free Regulation (EUDR). This regulation creates new challenges and also opportunities for Việt Nam's wood processing enterprises, he said.
Accordingly, the EUDR requires businesses to undertake a thorough due diligence process, ensuring their products are sourced ethically and sustainably, free from deforestation.
If the businesses comply with the regulations, they can expand their market in EU countries and gain trust in other markets. Many of Việt Nam's neighbouring countries are still very hesitant in their determination to comply with the EUDR, he said. That is an opportunity for Việt Nam's businesses.
Additionally, the US is increasing the frequency of trade defence investigations against Việt Namese wood products and requiring compliance with labour and employment regulations. Meanwhile, Japan requires Việt Namese wood products exported to its market to have sustainability certificates.
Canada has recently published a Regulatory Framework Paper for plastic packaging and certain single-use plastics that includes recycled content requirements and labelling rules for recyclability and compostability. This will impact most of Việt Nam's export commodity groups, Hoài said.
The series of new policies and regulations from importing countries force domestic businesses to adapt to meet those, including the requirements on legal timber and sustainable forest management, said Hoài.
At the same time, they should expand the export market instead of depending on a few certain markets and must actively renew technology.
Now, for the EU market, Việt Nam is implementing the regulations under the Voluntary Partnership Agreement on Forest Law Enforcement, Governance and Trade (VPA/FLEGT) and making efforts to ensure input materials from forests having Forest Stewardship Council (FSC) forest management certification.
Meanwhile, the association will pay attention to activities that improve trade defence capacity for the businesses, ensure timber legality, enhance trade promotion via domestic and foreign fairs, and accelerate digital transformation.
For wood craft villages having many business households and micro-sized enterprises that mainly supply products for the domestic market, the association will advocate to establish an association of wood craft villages.
The establishment is aimed at linking production, having a better market connection, and better performance of issues relating to fire prevention, environment protection and regulations on wood legality, Hoài said. — VNS