KUCHING: Leading Sarawak timber companies, which have benefitted from rising prices of tropical logs after Myanmar banned logs exports, are poised to gain more following the state government’s freeze on the issuance of new timber concession licences and clamp down on rampant illegal logging and smuggling activities.
Last week, Chief Minister Tan Sri Adenan Satem announced that the state government would not issue any more timber concession licences until the widespread illegal logging activities were addressed.
Concerned with the worsening illegal logging activities, Adenan said 50 forest department officers would be armed wth guns to get tough with illegal loggers and smugglers, and to beef up their enforcement work. In the first nine months, the state authorities seized RM2.95mil worth of illegal logs, which was a four-fold increase compared with last year’s corresponding period.
According to Adenan, he had a bird’s eye view of illegal felling of trees and had received reports on timber smuggling and non-payment of royalties.
He said these illegal activities would multiply and get out of hand if the Government did not act tough now.
Jaya Tiasa Holdings Bhd senior manager (sales and marketing) Woung Lik Chiong expected the tough measures taken by the state authorities to drastically reduce the rampant illegal exports of logs from Sarawak.
“In fact all this while, this is a problem which jeopardises the market trend to some extent,” he told StarBiz.
Besides being shipped overseas, it is learnt that some of the illegal logs were sold at low prices to timber processing mills.
Woung said as Jaya Tiasa’s log production was 100% legality compliance, the authorities’ measures to curb illegal harvesting of timber and smuggling would be an “added advantage” to the company business.
Existing timber concession licence holders are required to report to the authorities any illegal tree felling activities within or outside their concession areas. According to Adenan, the way these licence holders carry out this responsibility would be considered by the authorities when they apply to renew or extend the licence period.
The curb on illegal logging, said another timber player, would further reduce the already tight supply of logs for exports, and likey to drive up prices. Sarawak’s log production tumbled by 13% to 8.21 million cu m last year – the lowest in three decades.
Woung said tropical log prices had surged by an average 15% since Myanmar banned all exports of logs in April, this year.
Myanmar, which is Asia-Pacific region’s fifth largest tropical log producer and third largest exporter before, produced 5.59 million cu m and exported 2.35 million cu m (42%) in 2012, according to International Tropical Timber Organisation figures.
In the 12 months to June 30,2014 (FY2014), Jaya Tiasa recorded a 18% increase in the average selling price of logs. Despite lower sales volume year-on-year, the log segment’s pre-tax profit contribution to group had soared to RM63.8mil from RM23mil in FY2013.
Jaya Tiasa,one of the most established timber companies in Malaysia, has forest concession area of 713,200ha, and monthly extraction quota of some 94,500 cu m.
In FY2014, Woung said Jaya Tiasa produced around 1.1 million cu m, which was in line with the allocated harvesting quota by the state authorities. India remains the company’s key export market.
“The weather is good for logging activities this year, we shall stick to similar allocated harvesting quota,” he added. Last month, Jaya Tiasa harvested 107,302 cu m of logs.
Woung said Indian timber importers and downline manufacturers were confident to import timber steadily from Sarawak, adding that the strengthening US dollar against the rupee would have minimal impact on the market trend.
“Jaya Tiasa will supply logs to India with the maximium quantity as allowed by the export quota. It is not our aim to export more quantity beyond our allocated export quota but to enjoy better pricing with steady export quantity and consistent market demand.”
On plywood exports to key market Japan, Woung said Jaya Tiasa was anticipating maginal increase in sale, taking into consideration that China was loosening its control on banks in the disbursement of loans to businesses.
“For financial year ending March 31, 2015, the annual gross domestic product growth in Japan is likely to be lower than forecast because it is taking longer than expected for consumers and businesses to recover from the ‘tax hike shock’ which had resulted in a drop in capital expenditure and consumer spending.
“However, this will be a temporary issue and with a strong management system in Japan, the consumers will regain confidence soon, and the market will return to its strong position by end of the year,” said Woung.
Japan raised sales tax to 8% from 5% in April. Woung is optimistic about the 2015 market outlook for tropical logs and timber products in view of improving economy in India and China, which have the biggest demand for wood materials.