Inventory is full, labor is cut by over 50%

In the last days of October, the beginning of November, 2022, when we went to the facilities for preliminary processing and processing of wood for planting materials, and for the production of laminated timber in Thanh Hoa, Quang Ngai, and Dong Nai provinces, we witnessed the The woodworking workshop is dormant.

At Hai Oanh Forest Products Import-Export and Production Co., Ltd (in Yen Thai village, Te Loi commune, Nong Cong district, Thanh Hoa province), stacks of wood join together from the street to the factory.

Stacks of laminated timber are closely connected from the street to the factory at Hai Oanh Forest Products Import-Export Production Co., Ltd.

Mr. Do Van Hai - Director of Hai Oanh Forest Products Import-Export Production Co., Ltd - said that the enterprise has two components, which are laminated wood and wood chips.

In particular, joining the market of plywood in 2018 - when the market was in great demand, at that time, the market was very popular, but we were still "bewildered". Entering 2020, 2021, the market is still full of orders due to the high demand for production and processing of outdoor furniture and outdoor wood products. However, starting in 2022, when getting used to the market, orders almost stopped. Especially, starting from the first quarter of 2022, we can't sell anymore.

The factory of Hai Oanh Forest Products Import-Export and Production Co., Ltd is "silent", not operating.

Explaining the cause of this situation, Mr. Do Van Hai said that we manufacture and sell to trading companies in Ho Chi Minh City, Binh Duong. Here, they have factories that deeply process wardrobes and furniture for export to the US and EU markets.

High inflation and economic recession in these countries make most people in these markets prioritize food and food consumption and tend to reduce spending on luxury goods. Furniture is considered a non-essential item, so this product is currently very difficult to sell. Because they can no longer export products, wood processing factories stop buying raw materials.

Currently, we have about 1,400 m3 of laminated timber, equivalent to about 20 billion VND in capital. Businesses are under great pressure. Goods can not be sold, still have to pay interest and many other expenses. The company also had to cut employees by 80% from the end of the first quarter of 2022.

The picture of the timber industry in Dong Nai is similar. At Moc Quyet Thang Co., Ltd (in neighborhood 8 - Long Binh ward, Bien Hoa city), barbed wood products are also filling the warehouse. Ms. Nguyen Hoang Ly - Director of Moc Quyet Thang Company - shared, the gloom of the plywood market has been going on for nearly a year now. However, market information often follows the company's actual movements.

According to Ms. Nguyen Hoang Ly, in Ho Nai ward, Bien Hoa city, there is a huge sawmill village to serve the needs of almost the whole South for raw materials for production and export. But so far, many people in this craft village have had to return the factory and stop production.

Inventories are fully stocked at Moc Quyet Thang Co., Ltd

Trying to hold out from small production and export orders to maintain and retain workers. Ms. Nguyen Hoang Ly said that the market for plywood has been stable for the past 10 years. Notably, during the Covid-19 epidemic, the market for plywood developed very well, there were times when production could not be sold in time and there was no inventory of raw materials in stock.

The situation of "dropping" orders and reducing output has also happened for 8 months now. Because the output of laminated wood is to make furniture, cabinets, and beds, exported to the US and EU. The economic downturn in these markets has caused the output of laminated timber to be "blocked", and orders are not available for export.

Orders are reduced by more than 50% and the remaining orders that customers have placed before, partners also delay and delay delivery. Exports are extremely trickle. Revolving capital is extremely difficult. In the context of high interest rates. Therefore, enterprises are facing dual difficulties in terms of finance, orders and markets.

The situation of producing laminated wood at Tan Thanh Phu Trading and Service Co., Ltd is similar

In the Central - Central Highlands region, the output of wood-laminated enterprises is also very dismal. Ms. Luu Phung Linh Tien - Director of Tan Thanh Phu Trading, Production and Service Co., Ltd (in Binh Nguyen Industrial Cluster, Binh Nguyen Commune, Binh Son District, Quang Ngai Province) - shared, the unit is currently working 800 m3 of plywood remains. The workforce of workers in the factory has also been reduced by 80%.

Currently, the company only maintains a small group of employees. We're sorry, but we had to lay off our employees. Workers who lose their jobs will look for new jobs, until businesses have orders and the market recovers, recruiting workers is very difficult and requires training. “The sawmill stopped last October, the joinery stopped from September. At this time, there are only a few large lumberjacks left because the box machine cannot cut it. These types of wood must be sawed, if left, the wood will be damaged," said Ms. Luu Phung Linh Tien.

Businesses in a state of "hibernation"

Producing laminated timber is twice as profitable as making wood chips. However, the question is whether there is an output for deep-processed products. The picture of the wood industry at this time lacks bright colors. Some enterprises only work in moderation when they have production and export orders; Some businesses are in a state of stopping because the more they produce, the more they lose.

Previously, the price of laminated timber was 12 million VND/m3 (in 2021), but now many businesses offer it in the market at the price of 8-9 million VND/m3, which is below the cost to recover capital. However, they also cannot sell. According to businesses, the reason is not because of the price but because there is no output market.

According to Mr. Do Van Hai, if the wood material market "warms up", it will take 6 - 8 months to settle all inventories, then production activities will be restored to the normal state as before. .

But if the state of "freezing" furniture industry persists, the company may not be able to hold out. Currently in Thanh Hoa, there are a number of factories specializing in the production of laminated timber, which are in a state of bankruptcy, and have to sell their factories.

As of July 2022, at Tan Thanh Phu Trading, Production and Service Co., Ltd, workers still maintain a small amount of labor.

At the moment, the factory is empty of the sound of wood cutting machines and wood sawing machines

While plywood products have dropped dramatically, wood chips are "sucking up". Ms. Hoang Thi Ly is also concerned that if the situation of woodchips continues to increase in price and dominates raw materials for export billet, the future prospect is very difficult. In particular, the most difficult is the upcoming source of raw materials to prepare for upcoming orders if the economy in major markets such as the US and EU recovers.

“Round trees cut at a high price due to the attraction from the market of wood chips and timber bars without export orders, so the price decreased. According to forecasts of the EU and the United States, the economy will decline until the end of next year, and it is likely to recover. If the situation of woodchips continues to increase in price and dominate the raw materials of export embryos, "said Hoang Thi Ly.

Specializing in the field of supplying wood materials, it is also difficult to switch to a new direction. The woodchip industry is "hot", if switching to woodchips, many joinery businesses will question whether it will still be in time, and in the next few years, the woodchip industry will still develop or not?

In the current context, many businesses choose to "hibernate" to wait for the market to warm up. However, when and for how long this wait depends on the resources of each business. “Try to stay active about 50%. Cash on delivery is trickle and slow, but we keep paying bank interest and worker's salary. Most companies have such difficulties,” added Ms. Nguyen Hoang Ly.