Ministry of Agriculture & Rural Development

CARD Project Report

027/06/VIE
Improvement of operator skills and technology in small
rural sawmills in Vietnam


Domesticmarketrequirementsforsawntimber
(sizesandgrades),evaluatequalityaspects


By


PhanDucChien,PhilipBlackwellandPeterVinden April 2010
ProjectReport 027/06VIE
ImprovementofoperatorskillsandtechnologyinsmallruralsawmillsinVietnam.
Domesticmarketrequirementsforsawntimber Page2of12
(sizesandgrades),evaluatequalityaspects
Table of Content
1. Domestic wood market of Vietnam 3
2. Forest products industry and timber processing technology 4

production of woodchips is also considerable. Since 2005 there has been significant
growth in the production of wood furniture in Vietnam and this is likely to increase as
long as supply remains. For most products, however, installed capacity exceeds
production due to a shortfall in supply resulting from diminishing timber extraction in
Vietnam over the past decade.

Table 1: Average annual wood industry capacity and production in Vietnam 2001-2005
Product Capacity Production
Sawn timber 4,000,000 m
3
2,165,000 m
3
MDF 144,000 m
3
84,000 m
3

Plywood 150,000 m
3
60,000 m
3

Paper 970,000 m
3
30,000 m
3

Pulp 682,000 t 642,000 t
Wood furniture - 1,042,000 m
3

Currently there are 1,200 timber processing enterprises in Vietnam of which 24% are
state owned, 10.4% are joint ventures and 65.6% are non-state owned enterprises.
The technology used in Vietnam’s wood processing industry has progressed in
recent years although there is still a big gap in comparison with the most advanced
countries. In the future, if there is no renewal of equipment or update in technology, it
will be hard for wood products from Vietnam to compete in international markets.
The total capacity of the saw milling industry is estimated to be 3 to 4 million m
3
per
year. In 2003, MDF production capacity was 54,000 m
3
although recently, a factory
with 60,000 m
3
capacity was established. Particle board production capacity was
estimated at 80,000m
3
in 2003 and in 2001, 6 plywood factories were in operation.
Most of the country’s sawmills are small and produce only 1000 to 2000 m
3
/per year.
In general, investment in capital is low and the mills can only meet limited demand for
products that are of insufficient quality for higher paying markets. The mills do,
however, employ many labourers and take advantage of people’s available time
outside of harvesting periods.
Timber processing technology includes many different areas covering the full
spectrum of forest products production from harvesting to finishing of highly
processed products. The production of sawn wood in the past was commonly done
using crosscut saws and band saws. Both types of saw are, however, slow, have low
capacity and are inefficient in terms of wood loss. During recent years, vertical

only 2 million m
3
per year are actually processed.
Increasing investments have been made in the pulp and paper industry. However, in
general, Vietnam’s paper manufacturing facilities are small scale and use dated
technology. These factories also cause a lot of pollution, especially those producing
non-wood pulp, and paper produced in Vietnam is of low quality and cannot compete
with imported paper either for quality or price. Recently, new investments have
enabled purchase of new technology but product quality hasn’t met the export
requirements and other factors also need to be dealt with.
Currently there are nearly 300 paper production facilities in Vietnam but the total
capacity is under 20,000 tonnes. The scale of a company necessary to be
competitive is about 10 times higher than the current average capacity. For example,
new facilities in Thailand, China and Indonesia have capacities of over 500,000
tonnes.
In 2003, Vietnam produced nearly 640,000 tonnes of pulp and consumed
approximately 2.6 million m
3
wood. Major raw materials for these companies are
wood-pulp, waste paper and bamboo and in 2003 the estimated proportions
consumed were: 80% wood pulp and 20% non-wooden pulp and waste paper.
Demand for wood pulp imports has been gradually increased due to increased
requirements for higher quality inputs.
3. Timber supply of Vietnam
3.1. Forest land of Vietnam
In 2005 the Government of Vietnam categorized 19.02 million ha as Forest Land.
This area is broken down into three land use classifications: Production Forest
covering 7.1 million ha, Protection Forest covering 9.47 million ha, and Special-Use
Forest covering 2.32 million ha. The Production Forest area is dedicated to supplying
timber from natural forests and from plantations.

northern Vietnam, in the Red River delta, and in the south-eastern Mekong Delta
(Brown and Durst 2003). However, analysts point out that actual harvests greatly
exceed the AAC. For example, Waggener (2001) estimates total removals of large
diameter (>30cm) wood at 1.35 million m3. This is includes timber from illegal
harvests attributable to commercial harvesting operations, from small-scale
operators, and from land clearing for cash cropping (Barney 2005).
In tandem with reducing harvests of natural forests, Vietnam embarked on a program
to aggressively increase the supply of wood from timber plantations. The Five Million
Hectare Reforestation Program (5MHRP) was launched in 1998 and includes
reforestation of degraded land, improved forest law enforcement, and natural
regeneration of logged over areas. New planting is constrained by a lack of suitable
land, and the 5MHRP has had to focus on the northern region where there are few
industrial scale wood processing factories (PTMFPV 2008). According to MARD, by
2020, plantations will be able to supply 20 million m3 of timber (PTMFPV 2008).
Domestic timber production has increased at around 10% annually since 2000 (see
the data in Table 3 below). This has been achieved by a dramatic increase in
production from timber plantations, which has more than offset the reduction in
timber from natural forests. While the volume of logs harvested from natural forests
has declined from 1.8 million m3 in 1997 to 180,000 m3 in 2008. The volume of logs
from plantations increased from 1.9 million m3 to 3.38 million m3 over the same
period.
ProjectReport 027/06VIE
ImprovementofoperatorskillsandtechnologyinsmallruralsawmillsinVietnam.
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Table 3. Harvested logs from natural forests Unit: m3
1991-
1995
1996-2000 2001-2005 2006 2007 2008 2009
3.583.000 2.248.000 1.275.000 150.000 150.000 180.000 250.000

after planting when most logs have a diameter under 25 cm.
3.3. Sawn wood production and trade
Most sawmills in Vietnam are privately owned and, although accurate data are
missing, the total number of units probably exceeds ten thousand. Most of the
sawmills were established after 2003, and annual processing capacities range from
one hundred m3 to several thousand m3 per unit. Recorded production and installed
capacity have increased significantly over the past decade to reach 5.3 and 6.0
million m3 respectively (Table5). Actual figures are probably larger as some
production and capacity is likely to be unrecorded.
Table 5: Sawn wood production by ownership, and total capacity, 1995 to 2008 (1000
m3)
ProjectReport 027/06VIE
ImprovementofoperatorskillsandtechnologyinsmallruralsawmillsinVietnam.
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Year
State
owned
companies
Private
companies
Companies
with foreign
investment
Total
production
Total
installed
capacity
1995 500 1,092 14

industry. Since 2000, Vietnam’s furniture sub-sector has changed from being
comprised of small-scale enterprises producing for the domestic market, into export
oriented industrial scale production and Vietnam has become the fourth largest
global producer of furniture. Vietnam’s lower wage scale relative to its neighbours
drives production and export growth and has helped attract foreign investment in this
sector. It is likely that Vietnam’s accession to the WTO will strengthen the growth
opportunities of Vietnam’s furniture industry (ITT0 2007).
Wood product in general is one of Vietnam’s top exports, ranking fifth behind crude
oil, textiles, footwear and seafood. Exports increased on average 43 percent annually
between 2000 and 2008 to reach an estimated US$ 2.8 billion in 2008.
Vietnam has around 1,900 companies producing furniture. Furniture factories are
mainly located in three areas: the Ho Chi Minh City-Dong Nai- Binh Duong economic
triangle which is the largest high-end wood processing complex of the country; the
Central Highlands (Tay Nguyen) and the southern central region; and Hanoi and its
surroundings (VET 20/10/2006). According to Vietnam Economic Times, wood
processing employed 170,000 workers in 2006.
Some processing firms are large scale, are listed on a public stock exchange, and
may include foreign financing (VET 11/06/2007). Of 421 companies with foreign
investment, 183 (43 percent) had investors from Taiwan (MPI 2008).
Vietnamese wood furniture and handicrafts are shipped to over one hundred
countries and territories around the world (VET 20/10/2006), but the United States,
the European Union and Japan together comprise over 80 percent of the market.
Exports to the United States, which in 2007 made up 42 percent of the market, were
boosted by a bilateral trade agreement signed with the Unites States in 2001.
3.5. Wood based panel production and trade
Domestic use of wood based panels far exceeds domestic supply and a large portion
of MDF, particleboard and plywood used in Vietnam’s construction sector is
imported. In 2008, domestic consumption of MDF, particleboard and plywood totalled
245,700 m3 and only around 46% of this was produced domestically. The
ProjectReport 027/06VIE

Source: Draft of Forestry Development Strategy 2006 – 2020; GSO, 2008; and others
3.6. Pulp and paper production and trade
MARD (2006) lists 64 paper and board producers, concentrated in the Northeast,
Red River Delta, and Southeast regions. The dominant player in Vietnam’s pulp and
paper sector is the state-owned Vietnam Paper Corporation (Vinapimex), which in
2005 had 20 subsidiaries with a total annual production capacity of 171,000 tonnes
(Paperloop, cited in Barney 2005). The largest Vinapimex producer is Bapaco,
located in Bai Bang near Hanoi. The mill began production in 1982 and produces
mainly printing and writing paper, predominantly for domestic consumption. The mill
has one pulp line with an annual production capacity of 70,000 air-dried tonnes and
two paper lines with a total capacity of 100,000 tpa. Two other major pulp mills
owned by Vinapimex are Tan Mai and Dong Nai near HCMC and together, these
three mills account for 50 percent of Vietnamese production (ADB 2000). The
remainder of the sector is composed of around 37 mills owned by provincial
governments or by the private sector. These mills tend to be small scale with
production capacities generally less
ProjectReport 027/06VIE
ImprovementofoperatorskillsandtechnologyinsmallruralsawmillsinVietnam.
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FAO data show a leap in total paper and paperboard production between 1998 and
2004 after which total output remained constant at close to 900,000 tonnes through
2006. The largest share of production consists of the category that encompasses
wrapping paper, packaging paper, and board.
According to Vietnam Economic Times, the pulp and paper sector is poised for
aggressive expansion in the period 2006 to 2010. The Viet Nam Paper Association’s
goal is an expansion in annual pulp production capacity to 1 million tonnes and 2
million tonnes in paper production capacity. The Association estimates that USD 1.15
billion will be mobilized for construction of new pulp and paper mills, and an
additional USD 710 million will be used for expansion of existing mills. Much of this


3.8. Vietnam’s timber use and imports
Furniture production has emerged as a major industry in Vietnam and as a major
consumer of sawn wood. Other important products include wood based panels, pulp
and paper, and wood chip production. In 2008, Vietnam’s wood industry used 11
ProjectReport 027/06VIE
ImprovementofoperatorskillsandtechnologyinsmallruralsawmillsinVietnam.
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million m3, of which 57% was used for sawn wood for producing outdoor and indoor
furniture and for construction timber, 18% was used for particle board production,
MDF and woodchips, 24% was used for pulp and paper production, and 1% was
used for mining (Table 7).

Table 7: Total volume of logs used in Vietnam, sources and end uses (2003, 2005 and
2008)
2003 2005 2008
1. Total volume of logs used (mill. m3) 8.8 10 11
- Domestic logs 55% 49% 47%
- Imported logs 45% 51% 53%
2. End uses
- Volume used for outdoor and indoor
furniture, and sawn wood for
construction
51.6% 53.4% 57.3%
- Volume used for particle board, MDF
and woodchips
18.7% 20.2% 24.2%
- Volume used for paper and pulp
production

a
Myanma
r
Taiwa
n
Thailan
d
US
A
2007 49 73 104 85 46 135 52 44 63 97
11
months
of 2008
40 49 101 106 43 152 57 25 53 107
Source: Handicraft and Wood Industry Association of Ho Chi Minh City, 2009

Table 9. Value of imported timber and material for wood processing in Vietnam
Year 2004 2005 2006 2007 2008
Value (mil.
US$)
522 667 760 1.022 1.095
Source: VIFORES, 2009