Local suppliers urged not to further raise prices of export logs


  • Business
  • Monday, 17 Jun 2019

KUCHING: Japanese tropical log importers have asked their Malaysian suppliers not to further raise the prices of export logs or risk losing the Japanese market.

Export log prices from Sarawak have surged after neighbouring Sabah imposed a ban on log export in May 2018, and due to prolonged shortage.

Meranti regular log prices in Sarawak jumped to US$320 per cu m (free on board) from about US$300 per cu m after Sabah stopped the timber export. Meranti regular is Sarawak’s main export timber species.

“This (price) is almost an unacceptable level for users in Japan.

“Log importers are asking Malaysian log suppliers not to increase log prices any more as further increase (risks) losing log market in Japan,” according to the Japan Lumber Reports (JLR) (May 1 - 15 issue).

The JLR is a trade journal on the Japanese market published every two weeks, and is reproduced by the bi-monthly International Tropical Timber Organisation (ITTO) Tropical Timber Market Report.

International tropical log prices have remained firm for years due to the tight supply after Myanmar imposed a total ban on log exports in 2014 to curb smuggling and conserve its forest. Myanmar, the world’s fifth largest tropical log producers, was reported to have harvested 5.59 million cu m in 2012,of which 42% was exported.

The JLR acknowledged that Sarawak log suppliers are facing a higher production cost due to an increase in minimum wage and harvest tax this year.

In January 2019, minimum wage in Sarawak was raised by 14.1% to RM1,050 from RM920 while the rehabilitation and development cess was increased to RM5 from 60sen per cu m.

“South Sea (tropical) hardwood log prices continue climbing after Malaysia raised minimium wages since Jan 1,” said JLR.

Following the Sabah’s log ban, the Japanese importers shifted to Papua New Guinea (PNG) to source for the shortfall in their log supply for plywood mills. Their key choice is mersawa species whose price is about 20% higher than meranti.

However, the price of mersawa has eased after China slowed down buying this year due to the country’s economic slowdown.

Based on JLR figures, Japan 2018’s log imports from PNG jumped by about 164% to 76,394 cu m over 2017,and made up nearly 50% of its total import of 153,407 cu m for the year.

Japan’s log imports from Sarawak was 40,000 cu m in 2018 and Sabah 37,000 cu m (in first five months of 2018).

In 2019 January-April period, Sarawak exported 8,711 cu m of logs to Japan or a monthly average of 2,178 cu m against monthly average of 3,333 cu m in 2018.

“Log imports this year has been stable mainly from PNG but future is uncertain as there are rumours that Sarawak may reduce log export quota from present 20% in summer and may stop export eventually.

“With Sabah continuing log export ban and if Sarawak stops log export, PNG is the only source left,” said JLR.

Sarawak Deputy Chief Minister and Second Minister for Urban Development and Natural Reources Datuk Amar Awang Tengah Ali Hasan was quoted in recent media reports as saying that the Sarawak government plans to gradually reduce log exports up until a time when a total ban is imposed.

Sarawak had maintained log export quota up to 40% of total production for many years before it was reduced to 30% and then further cut to 20% more than a year ago.

As total log production has declined yearly in line with the state’s sustainable forest management policy, 80% of the log output is currently reserved for downstream processing mills,like plywood, veneer and particle board.

According to JLR, Japan has significantly increased the import of hardwood veneer from Malaysia and Indonesia for plywood manufacturing since second half 2018 to supplement the short supply of tropical hardwood logs.


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