Laminated wood producers on the line amid falling new orders

November 15, 2022 - 08:47
Laminated wood producers have to put their production on hold as they have begun to feel the pinch of falling orders.
Unsold laminated wood at a company piles up in recent months. — Photo

HÀ NỘI — The lack of new orders has left laminated wood producers with no choice but to stand idle for months, waiting for market recovery.

Đỗ Văn Hải, director of Hải Oanh Forest Production and Import-Export Trading Company Ltd., reveals that his firm was busy with orders in 2020 and 2021, during which wooden furniture was in high demand.

New orders began to fall in 2022 as his buyers – furniture makers in HCM City and Bình Dương Province – saw a sharp decline in their exports, resulting in weak demand for laminated wood.

"Our sales have ground to a halt since Q1/2022," said Hải.

Digging into the situation, the director attributes the export shrinkage to the high inflation and economic recession in importing countries, which have caused a shift in consumer spending to essential items.

"Wooden furniture fell in sales because it is not an essential item. As wooden furniture can't sell, so does laminated wood, an input material for the former," he explained.

He also said his company, so far, has VNĐ20 billion of working capital tied up in inventory, equivalent to 1,400cu.m of laminated wood. At the end of Q1, it had to cut staff by 80 per cent

The situation is no better for Mộc Quyết Thắng Company Ltd., which is struggling with loads of unsold inventory.

Nguyễn Hoàng Lý, director of the company, said the market has been gloomy for nearly a year and many producers have had to cease production on account of falling new orders.

"New orders have plummeted since wooden furniture exported to the US and EU came to a halt in August," said Lý.

She also said new orders have dropped by 50 per cent so far, putting her company on the line financially.

Lưu Phụng Linh Tiên, director of Tân Thành Phú Service and Manufacturing Trading Company Ltd., said her company has 800cu.m of unsold laminated wood to date.

It had to make 80 per cent of its staff redundant and close its sawmill in October in the face of falling orders. Now, only a few workers remain in the company to undertake the task of sawing wood.

Many producers have attempted to lower prices to boost sales but to no avail. Laminated wood finds no new buyers even though it sells at around VNĐ8 million per cubic metre, against its market price of VNĐ12 million per cubic metre in 2021.

Director Hải estimated that it would take up to eight months for his company to clear its unsold inventory, provided the market gets better in the short term. Otherwise, its bankruptcy is in prospect.

He also revealed that some producers in Thanh Hóa Province have begun to feel the pinch and reluctantly put their factories up for sale to cut losses.

While laminated wood prices are falling, wood chip prices are moving in the opposite direction.

However, the idea of shifting their focus to wood chips seems unappealing to laminated wood producers as they are uncertain of whether wood chips will keep growing in the next few years and whether it is too late to change their course.

For the time being, most producers are opting for 'hibernation' to bide their time. How long the hibernation will last depends on the specific financial situation of each producer. — VNS