Log shortage forcing some plywood mills to stop production

KUCHING: Log supply shortage is serious in both Malaysia and Indonesia, and this has forced some plywood mills to halt production.

“Log shortage in Malaysia and Indonesia is grave and plywood mills struggle to keep their operations.

“High log cost and low sales prices (of plywood products) put all the plywood mills in Malaysia and Indonesia in life or death situation,” according to the Japan Lumber Report (JLR).

In Sabah, the report said Sinora Sdn Bhd has stopped plywood manufacturing because of log supply shortage.

“Sinora has been supplying about 4,000 cubic metres of 12mm structural and concrete forming plywood a month for the Japan market,” added the bi-monthly trade journal on the Japanese market. The JLR report is reproduced in the latest International Tropical Timber Organisation (ITTO) Tropical Timber Market Report (Nov 16-30 issue).

SinoraisownedbyPriceworthInternational Bhd.

In Indonesia, JLR said Korindo group had shut down one of its two plywood mills because of log supply shortage.

“Korindo is the only manufacturer of coated concrete forming panel for Japan and has been supplying about 7,000 cu m a month from two plants. It stopped the operation of KAS plant so the supply volume will be down by half.

“Korindo plywood mill is in tough shape with operational loss for three consecutive terms. It stopped the operation of KAS plant on Oct 23,” added JLR.

Korindo has been supplying about 10,000 cubic metres of concrete forming panel a month for Japan.

According to the report, Korindo has been buying small low grade logs for manufacturing concrete forming panel but availability of low cost low grade logs is getting tight. This is

because the Indonesian government restricts clear logging to develop palm farm and selective harvest makes it hard to buy logs under 60cm in diameter.

Korindo was reported to have accepted too much orders before log prices soared.

JLR said Korindo was dealt with another blow as the sales of its products to the Middle East market had dropped.

Figures revealed that Japan’s plywood imports from Malaysia fell to 68,600 cubic metres in September from 100,500 cubic metres in January this year while that from Indonesia dropped to 62,600 cubic metres from 80,000 cubic metres during the same period.

JLR said tight log supply was caused by tighter restriction of illegal harvest of timber and weather factor.

In Sarawak, leading timber group Jaya Tiasa Holdings Bhd has scaled down its plywood and veneer production, also blaming log shortage as the reason.

In the 12 months to June 30, 2018, the group’s plywood mills utilisation rate had fallen to 39% of installed capacity of 180,000 cubic metres per annum from 46% a year ago. This had resulted in the mills’ production to drop to 69,320 cubic metres from 82,685 cubic metres year-on-year.

According to JLR, Malaysian and Indonesian plywood suppliers have proposed higher export prices of their products with reduced volume due to declining log supply as rainy season approaches.

“In the past, plywood mills in producing regions build up log inventories before arrival of the rainy season but this year is different. With tight supply of logs even in summer months, mills are not able to build up inventories, so the offered volume is much less than normal.

“Also plywood mills sell some portion of logs for export to generate profits even when mills rely on log supply from its own timberland,” it added.

The report said ample log supply was expected for plywood mills after Sabah banned log exports six months ago but this was not the case, as in reality, log harvest was stagnant by investigation by the central government for illegal harvest and the situation is the same in Sarawak.

The Sarawak authorities launched a major crackdown on illegal logging activities and corrupt practices in the timber trade about five years ago and the campaign is still ongoing.

Malaysian plywood suppliers have proposed to raise the export prices of their products – about US$690 per cubic metres C&F (cost & freight) on JAS 3x6 coated concrete forming panel and about US$590 on JAS 3x6 uncoated concrete forming panel. The prices are both an increase of US$10 per cubic metres from September.

“Indonesian mills are following Malaysian prices. The export prices (from both countries) are expected to keep climbing during the rainy season due to low supply,” it said.