Boom In Malaysian Wood Manufacturing Sector

According to The Star, Bursa Malaysia-listed companies producing panel boards are expected to enjoy strong profits in 2022 on the back of an upcycle in the wood manufacturing sector.

The ongoing Russian-Ukraine conflict, which has led to Russia banning the export of wood and forest products to the West, could see buyers sourcing alternative suppliers from countries in this part of the region such as Vietnam, Indonesia and Malaysia, according to Hong Leong Investment Bank (HLIB) Research.

The research firm said that recent trade disputes have bode well for local players in the sector amid firm demand for furniture and wood-based products from countries including the United States.

“The US-China and US-Canada trade wars as well as the Russia-Ukraine conflict have exacerbated the global supply demand imbalances. To recap, China, Canada and Russia were ranked among the top five exporters of wood products worldwide in 2019,” it said in a report.

It pointed out that the US market share of imported wood products from China had plunged significantly from 31 percent to 12.3 percent in just two years after the US-China trade war began in 2018. The US housing market is a top importer of plywood, veneered panels and sim laminated wood in 2020, accounting for 17 percent of the market share.

Another factor boding well for the local panel board players is that raw material costs, which had gone up due to ongoing supply disruptions and labour shortage, are tapering off from the peak, according to the research house.

However, manufacturers were able to offset the hike in raw material prices from the higher average selling prices (ASPs) of wood products because of the robust demand.

Adhesive prices, which make up 20 percent to 30 percent of the medium-density fiberboard (MDF) and plywood player’s cost, had peaked in January and continued to move downward amid easing urea prices and a decline in Global Supply Chain Pressures Index, said the research firm.

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