Call for plywood manufacturers to diversify into niche global markets
KUCHING: Malaysian plywood manufacturers should diversify into producing hardwood plywood products for niche markets internationally beyond the construction industry.
They can consider diversifying into the production of wooden flooring, high-density fibreboard and wood panels that cater to interior usage of buildings, according to International Tropical Timber Organisation (Itto) executive director Sheam Satkuru.
Most Malaysian plywood manufacturers now produce products for the construction industry.
“They need to upgrade their factories and prepare to invest in new technologies and machinery to manufacture new plywood products to be competitive in the international market.
“The future of tropical plywood is to capture the niche market from eco-friendly hardwood plywood for the construction industry. The tropical plywood industry should adapt to changing demand to supply products to both lower and higher end-users,” she told Starbiz.
She said to encourage plywood manufacturers to upgrade their plants and invest in new machinery, the Malaysian government could help by providing tax rebates or other incentives if these manufacturers are producing legally certified plywood products for export.
Satkuru is Itto’s first female executive director and second Malaysian to head this only inter-governmental organisation focused exclusively on the sustainable management of tropical forests and the sustainable and legal trade of tropical timber and timber products.
Before her election as Itto executive director in December 2021 for a four-year term, Satkuru was Itto director of operation (October 2017 to January 2022) and was based in Europe for Malaysia. She has nearly 30 years of experience in tropical forest policy and the wood products industry.
“Tropical plywood production has undergone major changes in location, from Japan and Indonesia to Malaysia (until the 2000s) and then to China, India and to a lesser extent Vietnam.
“This is due to the relative competitiveness of plywood processing in the major producer countries and growth in domestic plywood demand in China and India, declining availability of large-diameter peeler quality logs and changes in production technology, rising production costs and the increased availability of panel substitute products,” said Satkuru.
She said China and Vietnam have now become major tropical manufacturing hubs for processed wood products (SPWP).
According to Japan Finance Ministry’s latest data carried by Itto in its bi-monthly “Tropical Timber Market” report, the country has raised the imports of plywood from China and Vietnam in recent years and sharply cut the shipments from top suppliers Malaysia and Indonesia.
In 2022, Malaysia and Indonesia were tied as both countries exported 702,700 cubic metres (cu m) of plywood to Japan, but the export volume fell to 533,300 cu m and 543,700 cu m respectively in 2023.
During the same period, China and Vietnam had raised their plywood export volume to Japan from 108,600 cu m and 134,000 cu m each to 142,900 cu m and 178,800 cu m, respectively.
Japan is the No. 1 export market for tropical hardwood plywood produced in Sarawak. In 2023, Japan paid Rm1.21bil (free on board value) for 474,402 cu m imported from Sarawak, and this represented about 81% in value and 77% in volume out of the Rm1.49bil earned by Sarawak in the export of 613,548 cu m for the year.
In 2021, Sarawak exported 987,694 cu m of plywood worth Rm2.15bil, according to export figures from the Sarawak Timber Industry Development Corp (STIDC).
Sarawak’s plywood production volume has dropped significantly over the years as log shortage and rising log prices have impacted plywood manufacturing activities.
One of the leading timber companies, Jaya Tiasa Holdings Bhd, shut down its loss-making plywood plants three years ago while most other companies have reportedly cut down their annual production volumes due to the weak imported plywood prices in the Japanese market.
Satkuru said Malaysia, Indonesia and Thailand are also important tropical SPWP producers based on plantation timber.
As log production from tropical natural forests is declining as a result of governments’ sustainable forest management policy, she said degraded tropical forests should be reforested through the cultivation of high-value fast-growing timber species.
Satkuru called for joint ventures by consuming and producing countries to embark on industrial tree plantation projects on a share-profit basis to ensure the supply of wood materials for the wood-processing mills.
On global deforestation, Satkuru said many Itto member countries are making serious attempts to reduce the deforestation levels, adding, “I foresee in the next five to seven years, many countries will substantially improve in the deforestation levels.”
The world lost an estimated 10 million ha of forest (an area the size of South Korea) per year between 2015 and 2020, only slightly less than the 12 million ha per year lost between 2010 and 2015, according to global forest resources assessment 2020.
Based on Itto reports, the deforestation levels in Malaysia and Indonesia have fallen to near record lows. Malaysia achieved a 57% reduction rate from 2015-2017 to 20202022 period.
Itto Strategic Action Plan 2022-2026 lists one of the priorities as to “reduce tropical deforestation and forest degradation, enhance forest landscape restoration and the resilience of forest ecosystems to climate change and conserve biodiversity and ecosystem services”.
Satkuru said tropical forests represent 45% or 1.84 billion ha of all forests. On funding for Itto projects in member countries, she said Itto had for the first time in 10 years raised more than Us$7mil in 2023 from voluntary contributions, mainly by Japan, China and the United States.
“We are now targetting non-traditional donors as it is insufficient to rely only on traditional donors for the funds. We are in talks with three potential external donors, one of them is expected to come to fruition in 2024.
“We need a minimum of Us$10mil a year to fund Itto projects in Asia, Latin America and Africa. In addition, we require about Us$7mil a year for the administration requirements of Itto,” she added.
Since it became operational in 1987, Itto has funded more than 1,200 projects, pre-projects and activities valued at more than Us$430mil. A major Itto project in Sarawak is the Lanjak Entimau Wildlife Sanctuary, a 1,870-km large protected area for especially orang utan conservation.
“Malaysia has always been seen as a shinning beacon of tropical forestry leadership,” said Satkuru. “Malaysia is one of the founding members of Itto, which currently has 76 members from both producing and consuming countries.”