TP – Lack of orders, the European forest protection law about to take effect with strict regulations... are difficulties besetting businesses in the leather, footwear and wood processing industries. The risk of businesses closing, even going bankrupt, and workers losing their jobs is looming...
Processing sports shoes for a famous brand, a representative of Thien Loc Shoe Joint Stock Company (HCMC) said that currently the company produces only about 187,000 pairs/month instead of 300,000 pairs/month as before. Product reduced by 40% due to partner reducing orders. It is forecast that in June and July, the situation may be even worse.
The leader of the Binh Duong Province Wood Processing Association said that in the near future, the wood processing industry will be even more difficult when the European Parliament has passed a new law banning the import of goods believed to be related to deforestation activities, in order to promote global efforts to combat climate change. Wood products related to deforestation will be banned from import into the EU.
Mr. Nguyen Van Khanh, Vice Chairman of Ho Chi Minh City Leather and Footwear Association, acknowledged: Enterprises in the leather and footwear industry are in a state of "going up and down" because there are no export orders. According to Mr. Khanh, export orders are currently down to 60-70%. The domestic market is no exception. Many years ago, during this period, businesses would have orders until July and September, but at this time there are almost none. Some businesses operate moderately, some places have even closed but have not announced it.
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Workers produce wooden furniture in a factory in Binh Duong. Photo: HC |
“Previously, we predicted that by the end of the second quarter of 2023, orders would increase again. However, recently many giants in the leather and footwear industry have withdrawn so it is impossible to predict orders at this time. We encourage business owners to travel more, participate in fairs to find orders, find partners, not in Europe anymore but turning to Asia, even Africa. We should not "put all our eggs in one basket" to solve difficulties at this time," Mr. Khanh said.
The wood processing industry is also facing difficulties. Binh Duong currently has about 1,300 wood processing and exporting enterprises. This province's export of wood and wood products accounts for 43% of the country's total export turnover. In 2022, Binh Duong's trade surplus will reach 9.2 billion USD, accounting for over 80% of the country. The US is the largest market, accounting for more than 60% of wood export market share of Vietnam in general and Binh Duong province in particular. However, according to some wood businesses in Binh Duong, from the end of 2022 until now, demand in the US market has dropped sharply, causing the amount of goods exported to only about 35% of the factory's production output.
The export market is narrowed
“Previously, our 100% flooring products were only focused on exporting to the US, now it is only about 35%. When the US market slowed down, we sought to shift to other markets such as Australia, Canada... to compensate. However, the general economic situation is difficult so it takes time to stabilize," General Director of Sao Nam Trading and Production Co., Ltd. Do Thi Kim Loan shared.
According to Ms. Loan, to survive difficulties and create jobs for workers, the company must adapt and accept outsourcing for customers in Australia. Accordingly, Australian wooden board importers transfer raw materials to Sao Nam Trading and Production Co., Ltd. in the form of temporary import for re-export, carrying out the processing, packaging and re-export stages.
Mr. Le Minh Nghi, Deputy General Director of AA Construction and Architecture Joint Stock Company (Binh Duong), said that in the context of a decline in orders in the US market, businesses have turned to other markets such as Mexico, Chile or the peninsula in the Caribbean... According to Mr. Nghi, the value of wooden furniture exports from Vietnam to other markets has decreased and has not recovered.
As a large wood manufacturing and trading enterprise in Binh Duong, Truong Thanh Wood Industry Group Joint Stock Company is also "exhausted". In the 2023 plan, Truong Thanh Wood sets a revenue target of 2,222 billion VND, an increase of 10.3% over the same period, the parent company's after-tax profit is 54 billion VND, an increase of 15 times compared to the implementation in 2022. However, by the end of the first quarter of 2023, Truong Thanh has only completed 4.7% of the plan.
A representative of Truong Thanh Wood Company commented that the wood industry will still face many lasting difficulties. Chairman of the Wood Processing Association (BIFA) of Binh Duong province Nguyen Liem said that according to BIFA's survey, in the near future, many wood processing factories in Binh Duong may not have orders for production and must close. In the first quarter of 2023, Binh Duong wood industry saw a decrease in orders to 41%. Currently, many wood businesses in Binh Duong choose to return to their home country and access the domestic market to maintain. Some businesses shifted from manufacturing to processing, others changed their operating models to meet more stringent requirements.
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