|The timber industry at a crossroads to develop a survival strategy.|
In more than half of enterprises in Vietnam’s four furniture production hubs that contribute more than 70% to the value of domestic wood product exports, production has been suspended as several cases of COVID-19 infections are reported. appeared, further extending delivery times for foreign countries. buyers.
Long Viet Co., Ltd., a timber supplier in the southern province of Binh Duong, halted production last week when its 248 workers tested positive for the coronavirus. Bui Nhu Viet, General Manager of Long Viet, told VIR, “The business has suffered great damage due to the pandemic. We had to suspend production and could not continue with the stay-at-work model.
Viet fears the now broken supply chain will have consequences, with workers losing their jobs as the virus continues to spread. Long Viet’s latest contract renegotiation attempts have had mixed results.
“Many buyers sympathize with us and hope that we will resume production soon, but there are also many buyers who do not accept the situation and cancel orders,” Viet said. “Foreign buyers are often precise with schedules. They are worried about the Vietnamese government’s control over the pandemic and when suppliers will return to normal production.
Many manufacturers are now rethinking the stay-at-work model after the Long Viet incident. Tien Dat Wood JSC in south-central Binh Dinh province is under additional pressure after its main supplier, Long Viet, halted production. Lack of kitchen cabinet components may cause Tien Dat – one of the largest suppliers of wood products in the US and European markets – to fail to deliver on time on its contracts.
Tran Quoc Cuong, deputy manager of Tien Dat, said the company’s capacity has shrunk by 30 percent because its only factory is located in a closed area. Tien Dat is also short of workers, as in addition to those in quarantine, a huge number of workers returned to their hometowns when the new infections emerged. Meanwhile, the cost of the stay-at-work model increased overall costs by approximately 30% compared to the first quarter.
The timber industry recovered quickly from previous outbreaks. Most companies received many orders for several months. However, the current epidemic has caused a sharp decrease in production capacity, with some companies reducing production from five to just one container per month.
Nguyen Phuc, vice president of Binh Duong Furniture Association, said: “Buyers are not satisfied, but most of them agree to renegotiate contracts.
According to Phuc, renegotiations have two possibilities. First, buyers will wait for Vietnamese manufacturers to reproduce, hoping that the source of the goods will be guaranteed. This only happens if the buyer has a certain stock.
With the second option, buyers turn to manufacturers with factories in China to produce items that were once made there. However, it will be very difficult for buyers to buy from China or another country if they haven’t had any connection before. Going down this path would require transferring samples, building products, and producing trials, which can take a few months.
“So the first option is much more likely. Before making a decision, buyers will consider how long it will take for production to resume in Vietnam. Buyers will not penalize contracts because of the pandemic and many are showing good will,” Phuc said.
Timber and its products are a commodity with high export value, 65% coming from the provinces of Dong Nai, Binh Duong and Ho Chi Minh City.
In the first six months of 2021, the value of Vietnam’s wood product exports was estimated at $8.1 billion, up more than 61 percent from the same period in 2020, according to the Import Department. -Export of the Ministry of Industry and Commerce.
However, the current epidemic has pushed the timber industry into stagnation. The results of a rapid survey of timber associations showed that the production stoppage is spreading to the four largest timber processing centers in Vietnam.
In Binh Duong, 29 out of 100 companies participating in the survey closed, while in Dong Nai, 30 out of 50 companies stopped production. Meanwhile, in Ho Chi Minh City and Binh Dinh, many large companies have been forced to halt production at some factories.
Do Xuan Lap, chairman of the Vietnam Wood and Forest Products Association (VIFORES), said companies cannot produce if they are completely isolated from society, as they have to import raw materials, export finished products and receive food.
Meanwhile, COVID-19 testing methods are still showing errors despite ensuring that all employees who participate in the stay-at-work model test negative weekly and implementing random daily testing.
Pressure to maintain supplies from Vietnam is weighing heavily on the timber industry. Lap said VIFORES agreed last week to ask the prime minister and members of government to consider distributing vaccines to more than 700,000 woodworkers. Last May, VIFORES also sent a document to the Prime Minister asking to buy one million doses of vaccines to ensure that production and the supply chain are not interrupted.
Tran Thanh Nam – Vice Minister of Agriculture and Rural Development
As southern cities and provinces implement social distancing under Directive 16, it is critically important for processing and export companies to maintain production to meet industry targets. .
Currently, many companies apply the stay-at-work model very well, but there are also many that face difficulties due to lack of space, and employees are afraid to go to work. Many companies are also struggling to keep up with rising costs as they have to buy test kits for SARS-CoV-2 and perform these tests every three days for workers.
In order to maintain business production and not disrupt supply, the Ministry of Agriculture and Rural Development’s Task Force 970 has offered localities to bear the costs of testing for businesses, while giving prioritizing vaccination of workers in agricultural processing plants.
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