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Some industries lack orders, others cannot take more

While woodwork companies are lacking new export orders amid high inflation in the US and Europe, food-processing companies are not receiving new orders because of rising input material prices.

From January to June, 2022, Quang, the owner of a big wooden furniture manufacturer in HCM City, regularly received orders. Later, the number of clients began decreasing sharply, affecting the company’s business. Quang said the situation would not change until 2023. He said that his firm’s revenue had dropped by 30-40 percent. 

The decrease in woodwork consumption in the US and EU is explained by high inventories and low sales. Consumers in these countries are now concerned for essentials such as gas and food which are seeing escalating prices. 

“This has occurred in many markets. Some partners in the US and Europe are slow in making payments. Previously, they would pay within 30 days after delivery. But now the payment is made much later,” he said.

As the number of orders has dropped, the company has had to reduce workdays. Twenty percent of the workforce has been cut as the number of workdays has been reduced by four days a month. Some workers have quit because of low wages.

“We are struggling to survive. Cutting the workforce just helped a little. We still have to pay bank loan interest, factory rents, and fixed costs,” Quang said.

The latest reports by the four largest timber associations in Vietnam showed that of the 52 surveyed enterprises, revenue from the US has dropped by 8 to 80 percent, while some businesses said they had also lost revenue from the European market.

The situation is expected to remain unchanged in the last months of 2022. About 70 percent said they would scale down production to cut costs.

Under the project to develop a sustainable and effective wood processing industry in the 2021-2030 period, the export value of wood and forest products will reach $20 billion by 2025 and $25 billion by 2030.

Food processors

Ly Kim Chi, chair of the HCM City Food and Foodstuff Association (FFA), said that food processors were not taking new orders because of increasing input material prices.

In January-August 2022, the industrial production index of the food processing industry grew by 9 percent year on year. In HCM City, the index increased by 26.87 percent.

The demand for pasta, noodles, dry rice vermicelli and similar products has been very high from the US and Europe. However, Vietnamese producers are not receiving big orders for fear of input material price fluctuations.

After the pandemic, material prices increased by 15-40 percent. Other materials such as packaging and cartons increased by 30 percent, not to mention logistics costs. In many cases, enterprises are refusing orders as they cannot control material supply and prices.

Chi said enterprises should store materials to serve production, including the 2023 Tet (Lunar New Year) season to avoid the impact from price fluctuations.

Woodwork associations predict that the industry will not reach the export turnover target for 2022. Enterprises have asked the government to instruct the banking system to extend the debt payment deadline, cut interest rates, and provide unsecured loans.

Tran Chung

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