Tropical log prices surge, Myanmar export ban a boon to Malaysia

KUCHING: Myanmar’s total log export ban that took effect five months ago has pushed up tropical log prices, benefiting major Sarawak timber companies.

According to Ta Ann Holdings Bhd, the price of timber species keruing and mixed light hardwood (MLH) logs have surged by US$90 and US$20 per cu m respectively since Mynmar stopped exporting logs on April 1.

“Stronger log demand and price are expected in the second half of this year,” said the Sibu-based timber/plantation company in its latest quarter results report.

Ta Ann said the group raised its log sales volume by 30% as the average selling price of export logs rose 3% year-on-year in the April-June 2014 quarter.

This, it said, helped to boost its group pre-tax profit for the timber products segment (logs and timber products) to RM53.6mil in the first half of 2014 from RM32.5mil a year earlier or an increase of some 65%.

Myanmar, which banned all log exports to curb smuggling activities and conserve its forests, is the fifth largest tropical log producer and third largest exporter in the Asia-Pacific region. Malaysia is the region’s third largest log producer and exporter. Both Myanmar and Malaysia reportedly cater to similar export markets.

Based on International Tropical Timber Organisation (ITTO) figures, Myanmar harvested 5.59 million cu m of logs in 2012, of which 2.35 million cu m or 42% were exported. This made up some 22% of total global log exports.

WTK Holdings Bhd, on the other hand, reported a 6.9% hike in average round log prices in the April-June 2014 quarter and it took advantage of the firm price to increase sales volume by 34.1% year-on-year. On a six-month period, the company said in its latest earnings report that average log selling price climbed 11.5% while sales volume expanded by 8.9%.

The higher prices and sales quantity bolstered the group’s timber division’s pre-tax profit in the first half 2014 to RM25.1mil from RM15.7mil in first half 2013 a jump of 59.9%.

WTK shipped 75% of its log exports to India,15% to Vietnam and the balance 10% to China.

Another beneficiary is Jaya Tiasa Holdings Bhd, which is one of Sarawak’s most established loggers. The timber giant, which is also based in Sibu, said its average selling price of logs improved by 18% in the 12 months to June 30. However, due to the tight supply situation, the company registered lower sales volume during the period under review.

The higher log prices and higher sales volume of fresh fruit bunches (FFBs) from its oil palm plantations drove Jaya Tiasa group’s net profit 145% higher to RM59.6mil in the financial year ended June 30 despite lower revenue of RM1.03bil from RM1.05bil previously, due to lower quantity of logs and plywood sold.

Jaya Tiasa said in its latest earnings report that it expected positive performance of its timber business going forward as the improvement in weather conditiion had brought relief to the production and transportation of logs to export points.

The other plus factor, it added, was the stable demand from India, which purchases about 60% of Sarawak’s total annual log production.

With forest concession area covering more than 713,200ha, Jaya Tiasa said it had a monthly log extraction quota of 94,500 cu m.