Snapshot Of Asia’s Timber Market

As we welcome a new year, we take a look at the latest happenings in the timber markets across Asia. By ITTO

Malaysia

2017 looking brighter for economy 

The Malaysian Institute of Economic Research (MIER) has forecast a Gross Domestic Product (GDP) growth of 4.5 percent for Malaysia this year against an estimated growth of 4.2 percent projected for 2016. 

The projection was based on the country’s healthy trade balance in September, October and November last year, which stood at RM6.6 billion, RM9.8 billion and RM9 billion, respectively. 

MIER’s economic update anticipates the economy will perform better in 2017 if the trade balance momentum continues. GDP growth forecast for 2017 was revised downwards to 4.5 percent from its previous forecast of between 4.5 and 5.5 percent.

The positive views from MIER were supported by a report from a Malaysian investment bank, Hong Leong, which says “the outlook remains bright if not brighter in 2017 for the wood-based manufacturers as earnings will be underpinned mainly by continued weakness in the ringgit. 

 

Foreign labour issue near resolution

Labour shortages which have held down growth in the timber sector are set to ease as the government has introduced a new policy, the Employer Mandatory Commitment (EMC) which place more responsibility on companies hiring foreign workers such as paying the foreign worker levy. 

The EMC will hold employers fully accountable for their foreign workers on aspects such as job application, rehiring and repatriation and the employers will no longer be able to deduct the levy from the wages of their workers. The new scheme was to be introduced at the beginning of this year but has now been rescheduled for 2018 according to media reports. 

 

Certification in Sarawak

Sarawak wants the main timber companies to have at least one logging area certified by 2017. However, some companies have expressed concern over the conditions set by the Malaysian Timber Certification Scheme (MTCS). 

They fear that endorsement by PEFC means that MTCS is placed under the rules of this international certification scheme which may be detrimental to the autonomy of the timber industry in Sarawak.

 

Indonesia

Easier to do business in Indonesia 

Indonesia’s fiscal policy reforms and the improved investment climate are expected to boost the economy according to a press release from the World Bank launching its latest report on Indonesia. 

The report says Indonesia has improved its fiscal credibility but needs to accelerate tax administration and policy reforms in order to increase tax revenue. 

The report also highlights Indonesia’s recent improvement in the World Bank’s Ease of Doing Business ranking to 91st in 2017 from 106th in 2016, making it among the top 10 improvers globally. This improvement is particularly due to reforms that eased Starting a Business, Getting Electricity, Paying Taxes, Registering Property, Getting Credit, Enforcing Contracts and Trading Across Borders. 

“The government’s investment climate reforms have made it easier for businesses to open and operate, but boosting private investment for economic growth will require policymakers to move now on medium-term structural reforms” said Hans Anand Beck, acting lead rconomist at the bank. 

The report, now in its sixth year of production, is produced with support from the Australian government’s Department of Foreign Affairs and Trade. 

 

EU Trade Remedy Policy a challenge for exporters

The EU has revised its Trade Remedy Policy and the Director General of Foreign Trade, Indonesian Ministry of Trade, Dody Edward, said the implementation of this policy could impact the flow of exports to the EU if the EU determines products are being dumped or subsidised in Indonesia. 

Also voicing concern was the director of Trade Security Ministry of Trade, Pradnyawati who reported some Indonesian products had been affected by anti-dumping measures in the US. He said the EU is a strategic market for Indonesian exporters of agricultural and fishery products as well as wood products.

 

Restoration of peatland in 2017

The Indonesia government has announced plans to restore 400,000 ha of peatland this year, a lower target compared to 2016. Environment and Forestry Minister, SitiNurbaya Bakar, indicated that work will continue on the construction of canals to provide the means to manage water levels. 

NazirFoead, head of the Peatland Restoration Agency (BRG), said some companies with palm oil plantations faced declining productivity due to higher water levels but that the government would work with these companies to minimise the impact of the peatland recover efforts.

 

Myanmar

Customs statement questioned by timber traders

According to a news release from the Myanmar Customs Department, 202 companies have, so far, been permitted to export 197,512 tonnes of timber in the current fiscal year (1 April 2016 to 30 April 2017). 

Myanmar introduced a log export ban in April 2014 and at the same time the Forest Department banned the export of other type of products, baulks, boules and hand hewn squared logs. The news release from th customs did not specify the value or species. 

Analysts point to the need for better information since 197,512 tonnes, if all were teak, would have generated some US$400 million! 

They comment that timber exports have never achieved such a value suggesting the figures from the customs need further clarification. 

 

MTE supplying mills from log stocks

The Myanmar Timber Enterprise (MTE) has forecast that the country could earn Myanmar Kyat 250 billion (around US$185 million) from its sale of logs. 

Logging in Myanmar has been suspended for one year but the MTE had stocks of 15,000 tonnes of teak logs and 300,000 tonnes of other hardwoods to offer to mills in the country.

The domestic media has quoted U Aye Cho Thaung of MTE as saying they had recorded an income from sales destined to international markets at US$299 million while earnings from log sales for domestic consumption was around 90 million Kyas (about US$67 million). 

 

Shipment of teak and tamalan seized at port

Despite the efforts of the timber trade and government to stamp out illegal practices and eventually negotiate a VPA with the EU a shipment of around 500 tonnes of illegal teak and padauk/tamalan were recently seized in Yangon Port. 

The smugglers had tried to avoid the export restrictions and many believe that for the shipment to have gotten as far as the port suggests the smugglers had help from officials along the supply chain. 

U Barber Cho, secretary of the Myanmar Forest Certification Committee, said “that since this attempt at smuggling was done outside of the formal supply chain under which exporters comply with government regulations this single incidence should not be considered as reflecting a weakness in the control system”. 

Mr Cho praised the seizure of this illegal shipment and said “it was mainly caused by weak law enforcement and possibly corruption and that there will always be those who try to find loopholes in the formal supply chain.”

 

India

India's factory output unaffected by ‘demonetisation’

India’s industrial output rose in November despite the chaos caused by the decision of the government to withdraw large denomination notes from circulation. 

November growth rose by 5.7 percent year on year beating the 1.5 percent growth forecast by analysts. As inflation fell in December 2016 to 3.41 percent, the lowest since late 2014 it is anticipated the Reserve Bank of India may lower interest rates at its next meeting. 

 

More interest in sawnwood than logs

In its November 2016 e-magazine, ‘Ply Reporter’ provides an analysis of India’s log and sawnwood imports pointing out that, over the past five years, there has been a steady decline in log imports but that, over the same period sawnwood imports have grown almost 200 percent. 

Imports of good quality sawnwood of appropriate dimension leads to a reduction of residues which is a key concern of door manufacturers, construction companies and furniture makers. 

Initially, sawnwood imports of decorative species were imported from America, says the magazine, but increasing volumes now come from Malaysia, Indonesia and Myanmar and this trade has been given a boost by the reduction in import duties arising from agreements between ASEAN countries and India.

 

Coir panel an alternative to wood based panels

India accounts for more than two-thirds of world production of coir and coir products. Kerala is the home of Indian coir industry. Efforts are under way to better utilise coir and one area of focus that has been successful is the development of a panel termed coirboard. 

Coirboard is a composite of the needle felt coir fibre bound with phenol formaldehyde resin. The product is 100 percent wood free material made out of natural coir fibre and is a substitute for wood composite boards and even plywood in certain applications. 

The Bureau of Indian Standards (BIS) has, in cooperation with several companies, developed Standards for coirboard. 

The BIS says “The coir fibres are used as raw material with thermosetting adhesive as binder. Indian standard for the product has been evolved and the corresponding number is IS15491 : 2004.”

 

Plantation teak imports

Demand for imported plantation logs and sawnwood continues to be good, but the problem of phytosanitary regulations continue and suggestions for an alternate to methyl bromide treatment are awaited. 

When this issue is resolved, Indian importers would have access to a wider range of suppliers of raw materials.

 

Japan

Exports at 15 month high

Data from the Ministry of Finance shows Japan's exports rose in December marking the first increase in 15 months. The export performance was boosted by strong sales of electrical components and car parts, a positive sign for the export-dependent economy, but protectionism in the US could undermine further growth in exports. 

Exports to China, Japan's top trading partner, expanded 12.5 percent year-on-year and exports to the US, the second largest trading partner, rose 1.3 percent year-on-year, the first increase in 10 months. On the other hand exports to the EU fell in December. 

 

Talking down the dollar

After a good start to the year when the yen/dollar exchange rate was around 116 yen to the dollar, towards month-end the dollar weakened pushing the yen to 112 on 25 January, disappointing news for exporters and the Bank of Japan. 

The dollar fell mainly in response to warnings from the US President that the dollar was too strong and that this hurt the competitiveness of American companies. During the World Economic Forum in Switzerland, an adviser to the US President also warned of the risk of a strong dollar to the US economy

 

Bank of Japan concerned about housing oversupply

With home rents falling in Japan on a surge in construction of apartments, the Bank of Japan (BoJ) now faces yet another obstacle as it seeks to lift inflation. 

In its regional economic report for January, BoJ reported on the impact of investment in housing and knock-on on demand for durable goods and the conclusions were very sobering. In many cities and even in Tokyo, demand for rental properties was seen as weakening due to an oversupply of properties.

The BoJ has expressed concern on the current direction of the housing market however, US interest rates are set to rise further and this may give the BoJ an opportunity to move away from its negative interest rate policy.

 

Japan’s wooden furniture imports

In October 2016, for the first time since February of the same year, Japan’s bedroom furniture imports reversed the eight month downward spiral. October 2016 bedroom furniture imports rose around one percent from September levels but were still some 34 percent down from the peak in February. 

In contrast, kitchen furniture imports, while much smaller than bedroom furniture imports, continued at around the same level as seen four months ago. 

Given that both bedroom and kitchen furniture imports are influenced by the housing market, the difference in import trend is hard to explain. One possible explanation could be that imports of kitchen furniture reflect the growth in renovations rather than new home building and in the new housing market home buyers are putting off non-essential purchases of moveable furniture.

 

Office furniture imports 

Year-on-year, October imports of wooden office furniture were down 31.5 percent and down 2.5 percent from levels in September. In October the top three suppliers accounted for over 83 percent of all Japan’s wooden office furniture imports and all achieved increases in sales. 

China, the top supplier, saw its share of all wooden office furniture imports rise to 66 percent. The second and third ranked suppliers were Taiwan and Portugal, which accounted for nine percent and eight percent respectively of Japan’s wooden office furniture imports.

 

Kitchen furniture imports 

Japan’s October wooden kitchen furniture imports declined 18.5 percent year-on-year, but were slightly higher than in the previous month. The top suppliers in October remain Vietnam, the Philippines and China in order of the value of imports by Japan. 

Between them, Vietnam (38 percent) and the Philippines (33 percent) account for the bulk of Japan’s wooden kitchen furniture imports with China contributing a further 13 percent. 

In October, both Vietnam and China saw sales to Japan rise while exports from the Philippines slipped slightly compared to a month earlier. If imports of wooden kitchen furniture from Indonesia, Thailand and Malaysia are added to the total from the top three suppliers then around 90 percent of all Japan’s imports of wooden kitchen furniture is accounted for.

 

Bedroom furniture imports 

Suppliers in China lead the pack when it comes to Japan’s imports of wooden bedroom furniture, accounting for over 60 percent of all Japan’s October 2016 imports of this category of furniture. Vietnam is the second largest supplier providing a further 27 percent of October imports of wooden bedroom furniture.

The other main suppliers are Thailand and Malaysia, which provide a combined eight percent of imports to Japan. Year-on-year, Japan’s October 2016 wooden bedroom furniture fell 12 percent with shippers in China bearing most of the decline. Vietnam saw its share of imports rise in October.

 

China

US Hardwood Kiln Drying Certification Conference held in Beijing

At a recent conference in Beijing, the US hardwood kiln drying certification programme was promoted. 

The conference was co-hosted by the American Hardwood Export Council (AHEC), the National Hardwood Lumber Association (NHLA), the Hardwood Special Committee of the Shanghai Timber Industry Association, the US Department of Agriculture (USDA) and the US Animal and Plant Health Inspection Service (APHIS).

Participants were informed that the NHLA kiln drying certification system has been recognised as a cost effective alternative to the US phytosanitary procedures by member states of the EU, Australia, Brazil, Mexico, Venezuela and Vietnam. 

However, as a major market for US hardwoods, China has not yet agreed to accept the NHLA kiln drying certificate as an equal to a phytosanitary certificate. The NHLA certification system achieves the same goals as the APHIS Phytosanitary Certificate, but at a lower cost to both APHIS as well as exporters. The system for hardwoods mirrors the successful fifteen-year-old softwood certification programme. 

The organisers of the Beijing conference hope that, by explaining the details of the NHLA system to the Chinese National General Administration of Quality, Supervision, Inspection and Quarantine, trade can be expanded.

 

No to imports of sandalwood from Guinea and Guinea Bissau

China’s office for Endangered Species recently reminded Chinese timber enterprises not to import African sandalwood (Pterocarpuserinaceus) from Guinea and Guinea Bissau because sandalwood products from these two countries was prohibited as African sandalwood is listed in Appendix II of CITES. 

Timber companies targeted in crack-down on VOCs According to Environmental Protection Bureau in Dongguan City, policies will be introduced to control air borne pollution from 12 industrial sectors including wood-based panels, furniture and coating manufacturers. 

This has been done as these industries have a record of producing high levels of VOC emissions. These industries are said to be the main contributors to air pollution in the Pearl River Delta region. 

The city has demarcated a zone where strict controls will be applied to eliminate VOCs. Wood-based panel industries will not be allowed in the designated zone. 

The government of Dongguan is asking wood-based panel manufacturers to use environment-friendly low toxicity adhesives, lower volatile solvents and to introduce VOC capture technologies.

 

Log imports through Caofeidian Port

According to Hebei Entry-Exit Inspection and Quarantine Bureau, log imports through Caofeidian Port were 832,900 cubic metres valued at US$111 million in 2016, a year-on-year increase of more than 700 percent. 

Russia and Australia were the new suppliers along with the usual suppliers of Canada, the US and New Zealand. The range of species imported expanded to include Caribbean pine and araucaria along with the usual douglas fir, hemlock, spruce and fir.

 

E-commerce given priority

The National Development and Reform Commission, the Office of the Central Leading Group for Cyberspace Affairs and the Ministry of Commerce recently issued details of plans for inter-departmental collaboration in ecommerce. 

The 13thFive-Year Plan for Development of ECommerce issued by the Ministry of Commerce not long ago gives e-commerce services the target of achieving both economic growth and social development. 

The plan has three targets for China’s e-commerce sector for 2020: e-commerce transaction values at RMB40 trillion, online retail sales of RMB10 trillion and a workforce of 50 million people. 

For cross-border e-commerce, the plan aims to accelerate the speed of integrated customs clearance, promoting the building of a ‘single window’ integrated service system for customs, inspection and quarantine, payment, tracking and taxation and raising the efficiency of integrated customs clearance services. 

On rural community e-commerce, the aim is to support new business formats such as farming and forestry.

 

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