Timber Development UK: Vietnam Conference 28 July
Timber Development UK: Vietnam Conference 28 July
ARTICLE · By Lucy Bedry, Communications Executive · 2 August 2022
The UK is becoming one of the important markets for Vietnam’s wood industry. As Timber Development UK – the largest, most comprehensive supply chain body in the UK for timber – we took part in a recent Vietnam conference to update participants on the UK market and possibilities for the future.
On 28 July, Timber Development UK took part in a conference organised by the Vietnam Ministry of Agriculture and Rural Development (MARD) and Vietnam Timber and Forest Product Association (VIFOREST). The event was attended by over two hundred people in person and around forty online, tuning in to review the import and export situation of the first half of 2022 in Vietnam and assess market trends.
As Timber Development UK, we frequently present and act as a trusted and authoritative source of information for the timber supply chain. Our position within European and global networks means we are continually strengthening our access to data, guidance, and information.
Vietnam’s timber exports to all markets doubled from 2016 to 2020, increasing from $6.7 million to $12 million, and reaching $14.1 million in 2021. The UK is becoming an important market for Vietnam’s wood industry, in addition to other key markets including the US, Japan, Korea, China and the EU. Timber shares in 2021 were divided to: US 59.5%, Japan 10%, China 11%, the EU 27%, Korea 6%, Australia 1%, Canada 2%, the UK 2%, and other markets 5%. Vietnamese exports to the UK by value were highest in 2019 with $301.9 million, with 2021 seeing figures of $254.4 million.
Vietnam’s imports to the UK are dominated by the furniture sector. In 2021 this figure was $238.5 million compared to wooden products at $15.9 million. For the first quarter of 2022, these figures were $65.3 million and $3.9 million respectively.
Looking back at 2020 and 2021, the coronavirus pandemic influenced the UK market situation. Between March and June 2020, 61% of eligible employers put staff on furlough, a similar story can be found across Europe. With travel and holidays not permitted, a number of people spent the equivalent money on home improvements, garden renovations, decking and furniture. This led to a mini-boom in the UK economy.
As we move past the pandemic, demand remains strong but there are several economic and political challenges in the UK facing businesses, individuals, and governments. These are:
- High-interest rates, inflation and logistical costs continue following the coronavirus pandemic
- Heavy sanctions on the import of Russian oil and gas – which has significantly increased energy prices in the UK
- Complex regulatory environment following Brexit
- Political instability in the UK
- The Northern Ireland Protocol
Looking at the UK market going forward, construction activity in the UK remains robust and is currently still above pre-pandemic levels. This output is expected to remain strong near-term, growing by 2.5% in 2022 and 1.6% in 2023. The industrial sector is forecast to be the fastest growing sector in the next two years.
One key focus for Vietnam goods is private housing repair, maintenance, and improvement. By contrast, private housing is anticipated to fall by -3.0% in 2022 and -4.0% in 2023. Other areas including private housing, infrastructure activity and industrial output are expected to increase by varying degrees, but these sectors use little or zero timber by comparison and are not a focus for Vietnam’s exports to the UK.
There are challenges and barriers for importers and exporters relating to Vietnamese goods relating to: a lack of buyer awareness and promotion of Vietnamese goods, logistics and costs of shipping. There is also uncertainty on how Vietnamese goods will fit into the EU Deforestation-free Regulation and increasing due diligence requirements for the UK/EU Timber Regulation and the UK Conformity Assessed (UKCA). We are delighted to be able to work with Vietnam as a trading partner to promote their goods and provide market updates.
There are opportunities for Vietnam to trade with the UK and other import markets. This includes the ‘very low’ legality risk from Vietnam (Chatham House Vietnam Country note 2021). In addition, in 2021 Vietnam and the UK signed a UK-Vietnam Free Trade Agreement which will come into force from the first of January 2023. This Free Trade Agreement covers £4.8 billion (2020) in trade and provides a platform to grow trade and investment. In addition, this will potentially eliminate all customs duties.
Furthermore, Vietnam continues to progress with their Voluntary Partnership Agreement (VPA). Vietnam’s VPA strengthens the market position of verified legal timber products in the EU and elsewhere, driving the demand for legal timber and abolishing the illegal timber trade. Benefits of Vietnam’s VPA have been noted as: consolidation of legislation and regulations, clarification of forest land use rights, management and protection of domestic natural forests, simplification and streamlining of regulation and stakeholder consultations/civil society engagement.
We look forward to seeing Vietnam continue to progress with their VPA and the UK-VN Free Trade Agreement come into place from January 2023. We will continue to work with Vietnam and other trading partners to strengthen messaging around trade as a force for good and provide relevant updates and information sharing to this degree.