Timber product growth to slow


After posting a growth of 6.5% to RM22.1bil in 2015, Malaysia’s export of timber and timber products is expected to be flat this year, as the ringgit stabilises and shortages in labour and raw material weigh on the sector. HO WAH FOON reports.

THE sterling performance of the timber products sector last year may not be repeated this year as the weak ringgit and falling freight rates (which Malaysian exporters have to pay) are likely to have hit the bottom, according to newly-elected president of the Timber Exporters Association of Malaysia (TEAM).

Last year, Malaysia exported timber and timber products valued at RM22.14 bil, a growth of 6.5% over RM20.79 bil in 2014, according to the latest statistics from the Malaysia Timber Council Board.

The SME-dominated sector, covering export of sawn timber, plywood, rattan and wood furniture, netted earnings of RM19.5bil in 2013.

Lee Leh Yew, the new TEAM leader, tells SMEBiz the two positive factors last year for the sector — that is, currency and freight rates — have tapered off.

“Last year was a good year for our sector because of the strong US dollar and the drop in freight rates. But this year, the ringgit has stabilised and there is not much room anymore for freight rates to fall. Hence, overall market growth this year may be flat,” says Lee in a telephone interview.

As timber products are sold in US dollar in the international market, a plunge in the ringgit last year by about 20% boosted exports.

The sharp fall in the ringgit vis-a-vis the dollar made Malaysian timber products more competitive in the international market, Lee adds.

On the demand side, a new factor came into play last year. There was a stronger demand for Malaysian sawn timber from Europe due to the construction of temporary shelters for millions of refugees from war-torn Syria.

According to some industry players, the demand from Europe, which grew 15% last year, may continue to rise by 20% this year because Malaysian timber products rate highly in the market.

After the strong growth in 2015, Malaysias timber and timber products export is expected to flatten.

Despite this, Lee believes growth in the sector may be limited by labour shortage and decline in timber resources.

Hence, he does not encourage small and medium enterprises (SMEs) without experience in the industry to venture into this export-led sector.

“Our manufacturers are complaining that the uncertain labour policy in Malaysia is causing labour shortage. Due to this and the intense competition among existing players, I do not encourage new players to enter this sector now, even though there is demand,” says Lee.

In fact, Datuk Wee Jeck Seng of Malaysia Timber Council, a body formed by industry players, recently told Oriental Daily that local furniture companies had turned away many fresh orders from overseas importers due to the Government’s flip-flop labour policy and the sharp jump in foreign labour levy.

The furniture sector, a labour-intensive industry, is facing a shortage of 28,000 workers, adds Wee.

“Even if it is an opportune time for the industry to make more money, the labour problem might negate this opportunity,” he points out.

On March 18, the Home Ministry announced that the new rate for the manufacturing, construction and services sectors, was RM1,850 — a rise of RM600 from the previous rate.

In late January, the Home Ministry announced a new rate of RM2,500, but this was withdrawn after widespread protests from industry players and trade groups. As of now, the March 18 rate stands.

India, which imported RM1.89bil’s worth of furniture last year, has been identified as a growing market, and the MTC will be setting up an office in the sub-continent. Currently, MTC has offices in London, Dubai and China.

And due to the quality of Malaysia’s timber products, even China — a strong competitor with Malaysia in low-end furniture and plywood exports — is keen to import Malaysian products.

Malaysia currently ranks as the 8th largest furniture exporter globally and the third largest in Asia. Its furniture products are exported to over 160 countries.

The US remains Malaysia’s top furniture export destination and accounts for 30% of total export of furniture products, according to official figure. This is followed by Japan, Singapore, Australia and United Kingdom.

The Government’s long-term target under its National Timber Industry Policy (NATIP) is to achieve exports of timber and timber products valued at RM53bil by 2020.

Out of this figure, exports of furniture products is expected to record an export value of RM16bil, from RM8bil in 2014.

The Government is urging the furniture industry to undertake efforts to transform from original equipment manufacturing (OEM) to original design manufacturing (ODM) and original brand manufacturing (OBM).

Currently, the ODM and OBM components in the furniture industry are at 53%.

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Business , Central Region , timber , exports , TEAM

   

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