Malaysia
Adding value to peeler core residues
Sarawak based Samling Group announced it will produce engineered wood products in cooperation with Loggo IP, an Australian company.
The companies will work on a pilot project in Sarawak using Loggo IP’s patented engineered wood technology to process small diameter peeler cores.
It is known that every year tens of thousands of peeler cores (residues) from plywood production, but are only used to produce low value products packaging or for fuel.
In Australia, Loggo IP uses acacia and eucalyptus to produce engineered products for housing, commercial and government buildings.
Malaysia launches carbon exchange
Malaysia’s Bursa Carbon Exchange (BCX) has launched continuous trading and facilitation of off-market transactions for carbon credits.
The exchange provides a platform for companies to trade carbon credits, encouraging carbon reduction initiatives and promoting sustainability.
Continuous trading entails participating in the immediate trading of regular contracts on the market. On the other hand, off-market transactions are those that are negotiated bilaterally between the buyer and seller.
These transactions occur outside of the exchange platform and are usually facilitated after both parties have undergone a clearance process with Bursa Malaysia.
Within the first two days of trading, 10 companies successfully transacted 16,500 Verra-registered carbon credits on the exchange.
C&I for non-timber forest products
The Malaysian Timber Certification Council (MTCC) has published ‘Guidelines on the Application of Requirements for the Certification of Non-Timber Forest Products in MTCS ST 1002:2021 Malaysian Criteria and Indicators for Sustainable Forest Management’.
These guidelines, approved by the MTCC Board of Trustees in September, form one item in the MTCC Strategy 2020-2025 to include non-timber forest products (NTFP) in the scope of certification.
These Guidelines are to be included within the scope of certification under MTCS and will be useful to assist users, particularly forest managers, in expanding the scope of products covered under certification and allowing relevant forest-related stakeholders along the supply chain to benefit from the certification of all forest products, including NTFP originating from certified FMUs.
Engineered wood product development in Sarawak
Sarawak Timber Industry Development Corporation (STIDC) has embarked on a collaborative effort with experts from Universiti Teknologi Mara (UiTM) to shape the path of engineered wood product development in Sarawak.
In the Post Covid-19 Development Strategy (PCDS) 2030, Sarawak is pursuing the development of high value added industries with a special focus on engineered wood, furniture and bamboo-based products.
The general manager of STIDC said it is imperative for Sarawak to establish a first-class centre for research and development, particularly concerning product performance in the engineered wood sector.
US furniture wholesaler
US-based ‘Top-Line Furniture Corporation’, a large furniture importer and wholesaler based in Chicago, Illinois has expressed an intention to increase its imports from Malaysia over the next few years to RM230 million per year.
The company has been sourcing home furnishings from Malaysia since 2000 with total imports amounting to approximately RM840 million to date.
The increase in imports will not only benefit Malaysian furniture manufacturers but also benefit companies along the supply chain.
Malaysia’s furniture exports in 2022 totalled RM13.86 billion with the US being its top export market at RM7.24 billion or 52 percent of total furniture exports last year. For the first six months this year Malaysia’s furniture exports were RM4.07 billion, of which 49 percent went to the US.
Indonesia
Germany welcomes SVLK promotion campaign
Indonesian Deputy Minister of Environment and Forestry, Alue Dohong, led a delegation to promote Indonesia’s Legality and Sustainability Verification System (SVLK) to German wood product importers and representatives of international trade authorities.
During meetings Acting Director General of Sustainable Forest Management (PHL), Agus Justianto, said that Forest Law-Enforcement Governance and Trade (FLEGT), from which the Timber Legality Assurance System (TLAS) was developed in Indonesia is known as the SVLK is an important tool used by the Indonesian Government and various stakeholders in monitoring and ensuring the legality of wood products from Indonesia.
The Director of Forest Product Processing and Marketing Development, Krisdianto, explained the process, which is transparent, is recorded in the Legality and Sustainability Information System (SILK) and the data is open to all on the 'Satu Data PHL' website.
Director Krisdianto added "the flow of wood from the forest to industrial points is accompanied by a legal certificate of forest products (SKSHH) and monitored so that the chain of custody of logs can be followed. We also carry out a similar process in community forests but of course in a different way".
The domestic media in Indonesia reported that during the discussion importers in Germany welcomed the SVLK promotion campaign and hoped that trade authorities in every European country would understand the SVLK as an option in developing a due diligence system related to the implementation of EUDR.
The German participants were told Indonesian wood product exporters have questioned the status of the FLEGT process established between the European Union and Indonesia.
The German State Secretary, Silvia Bender, said that the German government understands the problems of implementing the EUDR, especially for small and medium businesses because the implementation of the EUDR also has an impact on business actors in Germany.
The German government itself is still reviewing the implementation of due diligence requirements, she said. She added that the German government understands the aspirations of the Indonesian Government and will convey this at a higher European Union forum.
Productivity boost can come from strong domestic woodworking machinery sector
The Chairman of the Indonesian Furniture and Crafts Industry Association (HIMKI), Abdul Sobur, said that assistance with machinery restructuring and a consistent supply of raw material will lead to an increase in domestic sales of furniture and crafts which could reduce the need for imports.
Sobur said that to increase productivity, efficiency and capacity companies need appropriate technology.
He added that one of the keys to successful down-streaming is building a technologically advanced machinery industry. HIMKI sees China's success in building productivity because it is supported by very strong woodworking machinery sector.
Abdul Sobur also pointed out that the furniture and crafts industry is expanding into new markets in response to declining demand in Europe and the US. The potential markets identified include the Middle East, India, China, Africa, Japan and other ASEAN member countries.
According to Sobur, a number of countries in the Middle East such as Qatar, Bahrain, Oman, and the UAE are accelerating infrastructure development which will have an impact on the need for furniture, crafts and home décor.
Apart from the Middle Eas,t the next target market is India, a country with very rapid growth. African markets, such as Egypt, Morocco and other countries are potential markets to explore. Meanwhile, the ASEAN market, including the Philippines, is the next that needs to be worked on seriously said Sobur.
Wood pellet factory for Sumatra
A joint venture company will build and operate a renewable energy biomass business. The company plans to build and operate a wood pellet factory in Sumatra with construction to start in early 2024. The company anticipates production can start in the first quarter of 2025.
Wood pellets play an important role in the green renewable energy landscape and has broad market potential amidst global demands to reduce carbon emissions.
The company said the development of the wood pellet industry will provide added value, not only to the company, but more broadly to society and the environment.
In the future, the community will become one of the partners in supplying raw materials for production, which in turn is expected to improve social welfare, community economic resilience, environmental sustainability and national energy security.
In related news the Ministry of Environment and Forestry (KLHK) continues to promote the cultivation of non-food biomass industries to produce low-emission energy raw materials to replace fossil fuels.
During the period 2020-2024 the target area for businesses to utilise production forests for bioenergy is 15,000 hectares.
The KLHK noted that there are 31 units of Industrial Plantation Forest Timber Product Management Business Permits (IUPHHK-HTI) and Perum Perhutani that have supported the development of energy plantation forests.
Indonesia is striving to accelerate the energy transition from coal to new and renewable energy through steps including using wood-based biomass energy as a substitute for fossil energy.
The KLHK supports biomass utilisation programs by promoting plantation forests for energy development and optimising wood waste from forests and the timber industry.
Customary forests area reaches 244,000 hectares
The Ministry of Environment and Forestry (KLHK) reported that the area of customary forests in Indonesia reached 244,195 hectares as of October 2023.
Head of the Sub-Directorate for Determination of Customary Forests and Private Forests, Yuli Prasetyo Nugroho, said that the area is occupied by 131 customary groups.
Most of the inventoried customary forests are on the island of Kalimantan with the largest in Central Kalimantan covering an area of 62,426 hectares, followed by West Kalimantan (50,711 hectares) and East Kalimantan (7,771 hectares).
The establishment of customary forests is believed to be an important step in ensuring the living space for forest communities, preserving ecosystems, protecting local wisdom and traditional knowledge as well as becoming a pattern for resolving conflicts related to communities in and around forest areas.
Carbon exchange encourages green funding
Indonesia has prepared a funding strategy for reducing carbon emissions from the forestry sector and land use in general through a carbon exchanges. The chairperson of the Board of Commissioners, Financial Services Authority (OJK), Mahendra Siregar, said that President Joko Widodo has launched the Indonesian Carbon Exchange.
He added "this (exchange) aims to provide a market mechanism that will support the government's NDC targets while balancing the transition to a sustainable economy."
Strategy to balance industrial wood production and ecosystem restoration
The Director General of Sustainable Forest Management, Ministry of Environment and Forestry, Agus Justianto, presented a strategy for integrating sustainable wood supply with forest restoration through ecosystem restoration and a multi-businesses approach when he was a panelist at Dialogue Day held during the 30th Asia Pacific Forestry Commission in Australia.
The event was organised by FAO in collaboration with the Australian National University.
Agus explained that Indonesia encourages the implementation of sustainable production forest management to meet industrial requirements as well as efforts on land rehabilitation.
Efforts are being made to return forest landscapes to their original condition through a business approach which incorporates ecosystem restoration.
Agus said that the wood processing industry in Indonesia is currently improving efficiency in order to survive amidst the limited availability of raw materials.
He added “a broader approach that integrates environmental and social aspects is an alternative for success in the forest product processing sector". The government, together with the community, business actors and other stakeholders are encouraged to implement a raw material supply chain from the sustainably managed forests.
Energy forests developed for biomass supply
Energy forests are being developed to create a biomass supply chain. The Indonesian Primary Energy Subholding (PLN EPI) is planting of energy forests on barren land owned by communities.
PLN EPI President, Iwan Agung Firstantara, explained that energy forest development is one of the current focuses considering that co-firing technology or coal substitution in Steam Power Plants (PLTU) is one of the strategic steps to reduce carbon emissions.
The Vice President for Biomass Procurement, Control and Logistics at PLN Energi Primer Indonesia (EPI), Erfan Julianto, explained that by 2025 the biomass requirement for the PLN Group's 52 Steam Power Plants will reach 10.2 million tonnes.
Biomass sources such as sawdust, wood chips and reject wood will be the main raw material.
HIMKI Collaboration with CNFMA
The Indonesia Furniture Industry and Crafts Association (HIMKI) intends to collaborate with the China National Forestry Machinery Association (CNFMA) to promote appropriate wood processing technology for the furniture industry.
HIMKI General Chairperson, Abdul Sobur, explained that both HIMKI and CNFMA appreciate the relationship between technological developments and the success of the furniture industry. According to Sobur, the impact of technology in the furniture and crafts sectors is undisputed as this can raise production efficiency and process precision.
In addition machine technology can expand the possibilities for furniture design. Designers can experiment with new materials and shapes knowing that modern machines can deliver with precision.
Sobur commented that machining technology has changed the furniture and crafts industry by enabling mass production, increased efficiency and precision, has encouraged innovation and customisation and contributing to sustainability efforts.
In related news, The HIMKI is working with the China Foreign Trade Guangzhou Exhibition General Corp, the organiser of the China International Furniture Fair, to expand Indonesia’s share of the furniture market in China.
Furniture sector exports declined in first half of 2023
Data from Indonesia’s Central Statistics Agency shows exports all types of furniture (except plastic furniture) weakened in the first half of 2023.
In the first half of this year, the total volume of national furniture exports reached 253,500 tonnes, down 26% compared to the first half of 2022. In the same period export earnings from furniture exports also fell (-31%) to US$1.07 billion.
In the first half of 2023 the largest export earnings were delivered by wooden furniture, reaching US$731.1 million.
However, this was 32 percent below the value of wooden furniture exports in the same period in 2022.
The main export markets for Indonesian wooden furniture were the US, Japan, the Netherlands, Germany, Belgium, Australia, England, France, Canada and Spain. However, in the first semester of 2023, almost all countries reduced their imports.
The value of wooden furniture exports to Japan fell 25 percent, the Netherlands (-40%), Germany (-47%), Belgium (-23%), Australia (-42%), the UK (-27%), France (-13%) and Canada (-58%). The only wooden furniture market country that increased purchases was Spain, but the increase was only around three percent.
Myanmar
Timber export performance reported
The value of timber exports in the first five-month of 2023-2024 declined year on year to around US$30 million.
This downward trend is likely to continue such that the year-end figure for exports could be around US$75million. The value of timber exports was US$128 million for the financial year 2021-22 and US$139 million for 2022-23 according to the Ministry of Commerce.
The impact of sanctions imposed by the US and EU and the latest measures taken against the state-owned banks, Myanmar Foreign Trade Banks and Myanmar Investment and Commercial Bank has weakened the country’s ability to export wood products. Millers report there are no orders from the US or EU.
According to the State-Owned Newspaper ‘The Global New Light of Myanmar’, Dr Than Naing Oo, Deputy Director-General of Forest Department, was quoted as saying “Between April and July of this financial year Myanmar’s teak found its way to 20 countries through 41 companies in 242 containers totalling 2,610 cubic tonnes. The export revenue amounted to US$8.137 million.”
India, Singapore, Malaysia, Thailand and China were reportedly the main markets for timber from Myanmar.
India
Inflation cools
The annual rate of inflation in September based on the all India Wholesale Price Index (WPI) was minus 0.26 percent compared to minus 0.52 percent recorded in August 2023.
Out of the 22 NIC two-digit groups for manufactured products, 14 groups witnessed an increase in prices in September whereas 8 groups witnessed decreases in prices.
The month-on-month increase in prices were mainly contributed by basic metals; other transport equipment, fabricated metal products, machinery and equipment, rubber and plastic products. The index for sawnwood rose while the indices for veneers and panel products remained flat.
Some of the groups that witnessed a decrease in price were food products, motor vehicles, trailers and semi-trailers, electrical equipment, leather and related products, chemical and chemical products.
Construction - the third largest sector in India
At a recent construction sector conference participants learned that with a US$3 trillion GDP India is one of the largest and fastest growing economies.
It is witnessing massive public investment, robust private consumption and structural reforms leading to rapid growth.
Construction in India is emerging as the third largest sector and estimates suggest it could reach US$750 billion in value in 2024. Urbanisation will contribute over 80 percent to GDP by 2050 and analysts say cities need to be receptive, innovative and productive to foster sustainable growth and ensure a high quality of living.
The focus of the conference was on steel and concrete for construction, there was no mention of wood which is surprising as the conference came on the heels of the release of a UN report “Building materials and the climate: Constructing a new future”.
This report offers policy makers, manufacturers, architects, developers, engineers, builders and recyclers a three-pronged solution to reduce ‘embodied carbon’ emissions and the negative impacts on natural ecosystems from the production and deployment of building materials, cement, steel, aluminium, timber and biomass.
Raw material from ‘Trees Outside Forest’ vital for manufacturers
In a significant development promoting sustainable management of trees outside of forests in India the Network for Certification and Conservation of Forests (NCCF), the National Governing Body in India, has secured full endorsement of the Trees outside Forest Certification System (ToFSTD) by the Programme for the Endorsement of Forest Certification (PEFC).
This provides the foundation for certification of wood-based raw material originating from Tree outside Forests (ToF). Currently Indian wood-based industries procure 75 percent of their wood-based raw materials from ToF, five percent from native forests and the balance from imports.
The NCCF, along with other key stake holders in the industry have been working towards the development of a country-specific certification scheme since 2016.
NZ/India log trade to resume
A resumption of the New Zealand log trade with India may soon be possible. New Zealand did have a modest log export trade with India (about 1.7 million cubic metres a year) but the implementation of a ban in New Zealand on the use of methyl bromide fumigant as a log treatment brought exports to an end because Indian regulations stipulate methyl bromide must be used with no alternatives proposed.
Recently the Indian authorities updated the phytosanitary requirements for Indian log imports, allowing fumigation of logs in ships holds on arrival in India in lieu of treatment prior to sailing from New Zealand. A trial is underway.
Attracting foreign investment to expand furniture exports
The Trade Promotion Council of India (TPCI) and the World Furniture Confederation (WFC) agreed a MoU aimed at establishing furniture industrial clusters in India.
The MoU was signed during the Annual General Meeting of the World Furniture Confederation in Dongguan, China. Representing India was Mohit Singla, Chairman of the Trade Promotion Council of India. TPCI is currently headed by Xu Xiangnan, President of the China National Furniture Association.
Singla, commented that “the MoU will promote engagement with global major furniture manufacturers, promote ‘Make in India’ for domestic and export markets and is the first signal of global cooperation in the organised furniture sector for India”.
He added that this cooperation is expected to attract foreign investment, enhance India's furniture exports and reduce the country's dependency on furniture imports.
Vietnam
Wood and Wood Product (W&WP) trade highlights
According to the General Department of Customs, W&WP exports to the Australian market in September 2023 amounted to US$13.2 million, down 11 percent compared to September 2022.
In the first nine months of 2023, W&WP exports to Australia reached US$105.4 million, down 30 percent over the same period in 2022.
In September 2023, bedroom furniture exports were valued at US$141 million, down 11 percent compared to September 2022. In the first nine months of 2023, exports of bedroom furniture earned US$1.2 billion, down 35 percent over the same period in 2022.
Vietnam's poplar wood imports in September 2023 were 30,800 cubic metres, worth US$11.7 million, up four percent in volume and 2.5 percent in value compared to August 2023.
Compared to September 2022, imports dropped nine percent in volume and 31 percent in value. In the first nine months of 2023, poplar imports reached 235,200 cubic metres, worth US$97.8 million, down 19 percent in volume and 33 percent in value over the same period in 2022.
Raw wood (logs and sawnwood) imported from China into Vietnam in September 2023 amounted to 45,000 cubic metres, at a value of US$21.0 million, down 11 percent in volume and four percent in value compared to August 2023.
Over the first 9 months of 2023, the raw wood Vietnam imported from China totalled 380,940 cubic metres with a value of US$190.74 million, down 27 percent in volume and 39 percent in value over the same period in 2022.
Wood processors awaiting market recovery
Vietnamese wood businesses are facing countless difficulties due to a lack of orders, rising costs and slow VAT tax refunds. Many have scaled back operations as they wait for the market to recover.
The latest statistics from Vietnam Customs show that in the 12 months to 15 September Vietnam’s total export value reached US$242.04 billion, down US$23.44 billion or nine percent year-on-year.
Of which, shipments of wood and wood products fetched US$9.01 billion, a decrease of 23 percent compared to the figure of US$11.67 billion achieved in the same period last year.
Vietnam’s wood industry is targeting exports of US$17 billion in 2023. However, exports of wood and wood products have been slow this year with most businesses facing a shortage of orders.
In the first eight months of 2023 Vietnam's exports of wood and wood products reached about US$8.3 billion, down nearly 26 percent year-on-year.
"Since May 2023 Vietnam's exports of wood and wood products have shown signs of a recovery, with over US$1.2 billion in exports per month on average. Meanwhile, Vietnamese raw wood imports have climbed 5-10 percent per month.
This shows that wood producers are preparing for year-end orders said Nguyen Chanh Phuong, Vice Chairman of HAWA.
He predicted that exports in the final quarter of this year could bring home an additional US$6 billion raising the total exports in 2023 to between US$14-14.5 billion.
Regarding the recovery prospects of the wood industry a representative of Thien Thanh Phat Timber said that the wood industry is completely dependent on international markets. When the world economy remains unsettled the Vietnamese wood industry struggles.
According to Le Hoang Hai, director of CMH Vietnam Import-Export Trading, there are signs of uneven recovery in the wood industry reflected in the irregular number of orders while at the same time raw material prices are escalating.
"The current wood market is unpredictable, with unstable prices and orders. For example, to produce domestic furniture we need to buy wood. But furniture orders are irregular with only short-term orders of two or three months causing difficulties for the balancing of production materials.”
The recovery of the wood market depends much on the real estate industry which is forecast by the Vietnam National Real Estate Association to remain quiet until the end of 2023 and only recover and develop healthier from the second or third quarter of 2024, thanks to legal improvements, economic growth and removal of financial bottlenecks.
In addition, many wood businesses revealed that one of the current difficulties is the delay in refunding value-added tax (VAT). In fact, many of them have had tax refunds delayed for two years in a row which disrupts their financial planning.
Improvement in exports to the US
Wood product exports to the US are warming up although sales over the past few months were down compared to the same period last year.
The Ministry of Industry and Trade's Agency for Foreign Trade Information Center reports the US remained the main market for Vietnamese wood.
In the first half of 2023, exports reached US$3.3 billion, accounting for 54 percent of the total but down 33 percent over the same period in 2022.
The driver of demand growth in the US market is low inventories and increased construction activity. Furthermore, the market becomes more active as the holiday shopping season approaches.
Low availability of housing combined with the numerous incentives offered by construction companies has increased buyer interest in new homes which has lifted demand for imported wood and wood products particularly wooden furniture.
The US economy is showing signs of revival with consumer demand increasing. The US government and its corporations continue to pay attention to Vietnam and pledge robust business collaboration. As a result of the positive rebound, big US retail chains have begun to resume orders with Vietnam.
According to Tran Lam Son, Deputy General Director of Thien Minh Import-Export, the US market is exhibiting signs of improvement. Thien Minh specialises in plantation wood as well as bamboo and rattan.
Two years ago, the Japanese market accounted for approximately 50-60 percent of this enterprise's overall export earnings while the US accounted for approximately 40 percent.
However, the US market currently accounts for approximately 50–60 percent of the company's overall export revenue.
Son said that, while shipments to the US were still down from the previous year, orders were up because clients were gearing up for the holiday shopping season.
He noted that during peak times, shipping costs to the US were more than US$10,000 per container but that cost has fallen which allowed more competitive pricing.
According to a representative of Bao Hung, a manufacturer of wooden furniture, shipments to Japan accounted for 60 percent of its total export revenue two years ago, while the US accounted for 40 percent. Now, 60-70 percent of exports are to the US.
The US market gained somewhat due to end-of-year imports while the Japanese market remained stagnant.
Building a brand
In the context of an increasingly difficult and challenging world market, building a brand for Vietnamese wood and bringing higher value to wooden and interior products is a ‘problem’ that businesses face.
In addition to meeting the average domestic consumer demand of about US$3-4 billion/year, Vietnam's wood industry exports an average of over US$15 billion each year, making Vietnam the 5th largest W&WP exporter.
Currently, the export markets for Vietnamese wooden furniture have expanded from 60 countries and territories in 2008 to over 120 countries and territories in 2022.
Although wooden furniture has a solid foothold in the domestic market, strong brands in Vietnamese wood and furniture such as Hoang Anh Gia Lai Wood Joint Stock Company (Gia Lai), An Cuong Wood Joint Stock Company (Binh Duong), Thuan An Wood Joint Stock Company (Binh Duong) has still not been able to make a mark in the international.
Most Vietnamese wood products have only won the trust of wholesalers and foreign agents, but are almost ‘unknown’ to the final consumer.
According to the General Department of Forestry the cause of this situation is that the policy to develop the wood processing industry's brand has not been implemented.
Meanwhile, Vietnamese wood and wood product businesses do not have experience and do not have enough resources in terms of capital, people and management qualifications to develop an overseas sales system, a foundation to build a brand.
Developing overseas markets requires large-scale production capacity and few Vietnamese enterprises can meet this requirement.
Mr. Nguyen Quoc Khanh, Chairman of the City Handicraft and Wood Processing Association (Ho Chi Minh HAWA) and Chairman of the Board of Directors of AA Company said it is time for Vietnamese businesses to change their thinking of making money by diligence in production, taking work as profit but need to build their own brand.
Branding will help businesses develop vision, direction, increase customer base, easily access international markets and optimise profits.
The brand itself will increase commercial value not only contributing to increasing export turnover and domestic wholesale value but also positioning Vietnam's wooden furniture industry on the world map.
Through building brands for themselves businesses will contribute to creating a brand for the Vietnamese wood industry.
At the workshop "Bringing Vietnamese fashion, furniture and household goods into the foreign distribution system" recently organised by the European-American Market Department (Ministry of Industry and Trade) Nguyen Chanh Phuong, Deputy Chairman and Secretary General of HAWA emphasised that Vietnam has the advantage of a complete, sustainable supply chain in terms of policies people, and raw material supply.
But to promote the export of Vietnamese wood products and furniture more effectively it is necessary to form a logistics and trade promotion centre for Vietnamese furniture.
In terms of market, businesses need to break away from traditional markets and target markets with good purchasing power such as Canada, England, Japan, Korea, India and Saudi Arabia.
At the same time, the timber and furniture industries also need to actively expand online exports and exports by projects. Promoting the promotion of national furniture brands at international furniture fairs is a strategy that Vietnamese businesses need to focus on for highly effective trade promotion.
Assessing the challenges of Vietnam's wood industry, Mr. Eryk Dolinski, Director of Wood Product Business Development, Supply Department of IKEA Group in Southeast Asia said that Vietnam's wood processing and furniture industry is still highly labour-intensive and raw material sources are mainly located in small farmers so origin is difficult to trace.
To solve the above problems, Mr. Dolinski said that the wood products and furniture industries need to focus on investing in automation to help increase production efficiency and product quality.
Automation not only in the factory but throughout the supply chain to meet the increasing demands of the market. At the same time, we must create a better working environment and reduce carbon emissions;
And increase efficiency in wood origin certification.
Optimising the supply chain from raw material transportation, sawmills to production and transportation stages must be focused on to maximise savings on raw materials, energy and logistics costs.
With the burden of origin and quarantine, Vietnam needs a different approach in exporting wood and wood products. In addition, businesses need to invest more in production to have green, clean production processes and reduce emissions to keep up with increasing demands from buyers.
Japan
Growth forecast raised
IMF's World Economic Outlook report says growth in the Japanese economy is forecast at two percent for 2023 up from its 1.4 percent prediction in July citing ‘a surge in inbound tourism’ as one of the major factors.
However, the IMF left its forecast growth for the world's third-largest economy in 2024 unchanged at one percent.
As more foreign travellers choose Japan as a holiday destination, drawn by the yen's recent weakness the revision to the growth forecast is also attributed to pent-up domestic demand, a pickup in car exports and the impact of the ultra-loose monetary policy.
After suffering supply chain disruptions during the Covid-19 pandemic, Japan's car makers and other export-oriented manufacturers have been recovering.
Small companies yet to experience a recovery
According to the joint survey by the Finance Ministry and the Cabinet Office business sentiment among major Japanese companies improved in the July-September quarter driven by a recovery in car makers and other manufacturers.
The business sentiment index for companies with a capital of 1 billion yen or more rose to plus 5.8 from plus 2.7 in the previous quarter.
The index represents the percentage of companies seeing their business conditions improve from the previous quarter minus that of firms feeling the opposite. A government spokesperson said “the outcome reflects a continued moderate recovery in the economy.”
The index for large manufacturers rose to plus 5.4 from minus 0.4, the first positive figure in four quarters as an easing of semiconductor shortages lifted sentiment in the auto industry.
For large non-manufacturers the index rose to plus 6.0 from plus 4.1, led by services and real estate firms. The sentiment index stood at plus 6.1 for mid-size companies but at minus 5.5 for small companies.
Further fall in household spending
August household spending in Japan dropped 2.5 percent from a year earlier, declining for the sixth consecutive month as rising prices forced a cut-back on food, education-related outlays and non-essential household items such as furniture.
The rate of decline was smaller than the five percent in July. Households of two or more people spent an average of yen 293,161/month according to the Ministry of Internal Affairs and Communications.
Food expenditure, accounting for around one-third of household spending, fell 2.5 percent and outlays for education dropped 14 percent. In contrast, spending on travel jumped three percent as more people took a summer vacation following the removal of coronavirus restrictions.
The continued weakness in spending came as real wages dropped 2.5 percent in August for the 17th consecutive month of decline as the impact of rising prices outweighed that of salary increases. The data is a key indicator of private consumption which accounts for more than half of the country's gross domestic product.
China
Dramatic decline in birch log imports
According to China Customs, birch log imports fell sharply in the first eight months of 2023 and were 971,231 cubic metres valued at S$130.73 million, down 33 percent in volume and 36 percent in value over the same period of 2022.
The average CIF price for China’s birch log imports fell five percent to US$135 per cubic metre.
The top suppliers of birch log imports were Russia and Latvia. 95 percent of China’s birch logs were imported from Russia and some was imported from Latvia in the first eight months of 2023.
In addition, China imported small volumes of birch logs from Estonia, US, Belgium and Canada.
China’s birch log imports from Russia were 922,131 cubic metres valued at US$118.6 million in the first eight months of 2023, down 27 percent in volume and 28 percent in value compared to the same period of 2022. The CIF price for China’s birch log imports from Russia fell one percent to US$129 per cubic metre.
China’s birch log imports from Latvia amounted to 48,064 cubic metres valued at US$11.7 million in the first eight months of 2023, down 73 percent in volume and 69 percent in value compared to the same period of 2022. The CIF price for China’s birch log imports from Latvia rose 14 percent to US$243 per cubic metre.
Russia's increase in the export tax on birch log exports has put pressure on Chinese enterprises and this is why imports have declined to a record low.
Surge in particleboard imports from Thailand
According to China Customs, in the first half of 2023 China’s particleboard imports fell 26 percent to 318,000 tonnes valued at US$142 million, down 41 percent over the same period of 2022.
Thailand was the largest supplier for China’s particleboard imports and they surged 56 percent to 123,000 tonnes however, imports from other suppliers fell.
The dramatic increase in China's particleboard imports from Thailand was mainly due to the fact that Chinese enterprises have set up factories in Thailand and a large amount of particleboard produced is exported to China.
Europe
Europe’s wooden furniture consumption falls to lowest level since 2015
The last three and half years, marked from the start of 2020 by the Covid-19 pandemic and from February 2022 by war in Ukraine, have seen unprecedented changes in Europe’s wood furniture sector.
The sector passed through a period characterised by an initial but very short-lived fall in demand in the second quarter of 2020, followed by rapid demand escalation in 2021 at a time when material shortages and other logistical challenges greatly reduced availability, and then by another sharp decline starting in the second half of 2022 and continuing this year.
During this relatively short period, major changes have occurred in patterns of supply and demand, trade flows, consumer preferences and working conditions, distribution channels, design, and fashion trends. Companies throughout the sector are having to evolve new strategies in response to a transformed world.
Recent trends in the value of production trade and consumption of wood furniture highlight that the onset of the pandemic led to a nine percent downturn in the euro value of EU27+UK wood furniture production and eight percent decline in consumption in 2020.
This was followed in 2021 by a strong 27 percent and 29 percent rebound in production and consumption respectively. In 2022, production and consumption fell back even more sharply than in 2020, respectively by 11 percent and 12 percent.
Based on performance in the first half of 2023, production and consumption are forecast to fall by another six percent and 10 percent this year. With a forecast value of around €38 billion in 2023, European wood furniture production and consumption this year are expected to be at a level not seen since 2015.
Furniture sector performance has varied widely between European countries. Eurostat data shows that while overall EU27 furniture production in 2023 is now at the level prevailing in 2015, some countries including Romania, Belgium, Sweden, Germany, Netherlands, Denmark, and France, have fallen well below this level.
Most of these countries recorded only a modest rebound in furniture production in 2021 followed by a dramatic downturn from the second half of 2022 onwards.
In contrast, furniture production in Poland and Lithuania continued strong even during the first year of the pandemic in 2020 and increased very rapidly during 2021 and 2022. Although there has been a sharp downturn this year, production in Poland and Lithuania is still well above the pre-pandemic level.
Furniture production in Italy, Portugal and Spain has been less volatile than in other European countries in the last three and half years and is likely to remain above the pre-pandemic level despite sliding this year.
The long-term rise in European internal trade and in imports from outside the region which began in 2013 as the European economy gradually recovered from the eurozone currency crisis, continued throughout the pandemic in 2020 and accelerated in 2021.
European exports of wood furniture to countries outside the region, which were flat in the period between 2013 and 2020, also increased in 2021. However, European imports, exports and internal trade in wood furniture all declined sharply in 2022, a trend which has continued in 2023.
Internal EU trade in wood furniture in the first six months of this year was down 20 percent, while imports fell 19 percent and European exports were down 11 percent.
These figures underline the extent of the downturn in the European economy. Consumer confidence and spending has fallen sharply as state support for households is running out and retail energy prices remain very high and are expected to rise again during the winter months. Higher interest rates have increased mortgage costs while real incomes continued to be undermined by high levels of inflation.
The latest purchasing managers’ indices reveal that activity continues to contract in the European service sector and in construction. Stingier bank lending is leading to a 0.4 percentage-point reduction in GDP growth each quarter, according to Goldman Sachs. Corporate insolvencies in the EU rose by more than eight percent in the year’s second quarter, compared with the first, and have reached their highest since 2015.
The impact of tighter monetary policy will peak in the second half of this year, predicts Oliver Rakau of Oxford Economics, a consultancy.
The total quantity of EU27+UK imports of wood furniture from outside the region fell 18 percent in 2022 to 2.40 million tonnes. In the first six months of this year, imports were already down another 19 percent.
Total imports this year will likely be back to a level last seen in 2016. While declining imports in 2022 were at least partly due to continuing supply problems caused by renewed Covid-19 lockdowns in China and the war in Ukraine, this year the leading driver has been a dramatic falloff in European consumption.
Wood furniture imports into the EU27+UK decreased from all main supply regions during the first six months of 2023; by 13 percent from China to 550,000 tonnes, by 33 percent from the tropics to 220,000 tonnes, and by 16 percent from other countries to 300,000 tonnes.
Tropical countries have lost share in the European market this year as supplies from China have come back online with the end of Covid-19 restrictions there.
Imports from all tropical countries supplying wood furniture to the EU27+UK declined very sharply in the first six months of this year including Vietnam (-35% to 84,200 tonnes), Indonesia (-32% to 38,700 tonnes), India (-33% to 35,600 tonnes), Malaysia (-37% to 33,700 tonnes), Brazil (-19% to 25,300 tonnes), Thailand (-71% to 1,700 tonnes) and Singapore (-27% to 2,800 tonnes).
There was a sharp fall in tropical wood furniture imports into the UK, the largest European market, in the first six months of this year, down 38 percent to 67,600 tonnes.
Large declines were also recorded by France (-25% to 38,500 tonnes), Germany (-40% to 28,500 tonnes), Netherlands (-35% to 23,900 tonnes), Belgium (-47% to 12,400 tonnes), Denmark (-27% to 6,300 tonnes), Italy (-35% to 5,100 tonnes), Ireland (-38% to 4,800 tonnes), and Poland (-35% to 4,800 tonnes).
Of all large European markets, only in Spain did imports hold up reasonably well in the first half of this year, reaching 15,100 tonnes, the same level as last year.
