By JACK WONG
jackwong@thestar.com.my
PROLONGED shortages in log supply will be a boon for Sarawak timber players, which are expecting higher prices this year.
Jaya Tiasa Holdings Bhd expects log supply to remain tight due to bad weather which has adversely affected logging operations.
Log production is low between December and February as logging camps take a 10-day break each for the Christmas, New Year and the Chinese Lunar New Year celebrations. Log production was significantly lower last year compared with 2009.
“We had not expected so much rain last year but hopefully, the weather will improve this year,” managing director Datuk Peter Yong told StarBizWeek recently.
The impoundment of the Bakun hydroelectric dam in upper Rejang River basin in central Sarawak since last October has also hampered the transportation of logs as some of the logging roads are flooded, says Yong.
The affected concessions have an estimated monthly production of between 20,000 and 30,000 cu m of logs. Log prices had soared by 30% for certain species last year due to a shortfall.
“I believe log prices will stay at the current high levels and remain stable this year,” adds Yong.
Sarawak's largest plywood supplier Shin Yang Group executive director (wood based) Wong Kai Song concurs that log shortage will lead to higher plywood prices this year.
“Strong demand for tropical plywood following the recovery in traditional export markets like Japan, South Korea and Taiwan will push up prices as many processing mills are hit by an acute shortage of raw materials,” he adds.
Wong who is also Sarawak Timber Association (STA) panel products committee chairman predicts a 15% upside in plywood prices this year compared with over 10% increase in prices last year.
“Plywood prices are trending upwards and I expect 2011 will be a better year for the Sarawak plywood industry players,” he says.
As the log supply situation is not expected to improve, Wong expects local mills to achieve an average of between 70% and 80% of their full capacity in 2011.
With several new mills coming onstream last year, the number of plywood mills in Sarawak has increased to 35, with a combined installed capacity of more than four million cu m a year.
Wong says some plywood mills are importing raw materials (soft wood) from Australia and New Zealand but the volume is less than 5% of Sarawak's total requirements.
The average price of concrete panels is US$420 per cu m compared with between US$350 and US$370 per cu m in 2009 when the prices were at historical lows.
There are many outstanding orders from traditional buyers in Japan, South Korea and Taiwan.
Wong says the inventories in Japan are at a very low level now. At theit height, the inventories are about six months of the supply.
Statistics for the first 11 months of last year showed that Japan imported nearly 1.15 million cu m of panel products worth RM1.7bil or close to 50% of Sarawak's total exports of 2.51 million cu m (RM3.43bil).
South Korea is the second biggest importer, consuming 465,000 cu m valued at RM515mil while Taiwan imported 273,000 cu m worth RM341mil from Sarawak during the same period.
Apart from the shortfall in log supply, Wong says most plywood mills are hit by labour shortage due to the low wages and long working hours.
“Most foreign workers prefer to work in the plantations which pay them higher wages,” Wong adds.
Statistics show that Sarawak produces 9.27 million cu m of logs during the first 11 months last year compared with nearly 10.4 million cu m for the whole of 2009.
Sarawak government allows only 40% of the log production to be exported while the remaining is reserved for the local processing mills.
During the January to November 2010 period, Sarawak exported 3.68 million cu m of logs worth nearly RM1.82bil. India was the biggest buyer, taking 2.05 million cu m (valued at RM1.08bil) or 55% of the state's total exports.
This was followed by China importing 547,000 cu m worth over RM234mil and Taiwan paid about RM216mil for 452,000 cu m. Other major importers were Japan, Vietnam and South Korea.
On issues facing the logging industry, he says the rising diesel prices have contributed to higher production cos
