The last market report on Asia was cautiously optimistic that the previous slow decline in Far East timber prices had ended and an upturn was in sight. This proved correct and, while any price gains have been small and major markets remain quiet – and buyers equally cautious – the signs continue to point towards a firmer and rising price trend, especially for meranti/seraya species at the top grade end of the market.
Log prices have moved upwards and supply is only in line with the modest demands. No-one is willing to hold stock at any stage in the supply chain and this factor alone results in market stability.
Domestic log prices in Peninsular Malaysia have moved up US$5-10/m3. They are now almost the same as in June 2001. Only merbau is unchanged. Indonesian domestic log prices have remained unchanged and are still at very low levels.
Export logs
Export logs from Sarawak are priced very firmly and meranti SQ and up, small and super small are also up around $5-10/m3. Keruing, selangan batu and kapur are unchanged. Demand for small logs has gone up as the Japanese plywood mills in particular seek to lower overall costs through increasing the proportion of the cheaper small and super smalls in their current log purchases. There is some more interest now in Papua New Guinea logs as all buyers try to source lower cost raw materials.
It is ironic that current log prices are less than half what they were some years ago, yet buyers continue to try to push prices lower to compensate for all their other higher costs for inputs for processing and labour.
In Sabah, the government is continuing to crack down heavily on illegal logging. Even 20 years ago the Forestry Department produced figures showing the forthcoming shortfall in log supply and the excess processing capacity which already existed over the sustainable annual log harvest volume. This situation has now occurred and on-the-spot estimates are that only around 25% of processing mills are operating, with the resultant severe shortage of timber. Sales from many exporters are consequently much reduced over previous levels.
In Indonesia also, the authorities have stepped up their long-running campaign against illegal logging and consequently log supply is reported as ‘very bad’. The situation for even legal logging in some areas is compounded by difficult security, with many logging groups afraid to venture into the forests to cut logs for fear of being held up by armed gangs and losing their trucks and equipment, or putting their lives at risk if they resist.
A shortage of logs appears to be the major market factor affecting the supply of sawn and processed lumber. As log stocks are low, so also are stocks of sawn lumber. Currently only a few mills in Peninsular Malaysia are able to offer selects and better KD dark red and DUC meranti and offer prices reflect the shortage factor at some US$100-120 per ton c&f higher than the same specifications on offer in January 2002.
Truck sizes of keruing are on offer in the usual UK specification of 16ft and longer, allowing 10-15% 12-15ft with an asking price of US$25 per ton c&f higher than in January. Buyers’ current ideas are for only US$5 higher but few, if any, mills are willing to lower their prices.
Some sales of mixed seraya have been made to Japan, and AD red seraya to South Africa. The Thai market is possibly the most active at present.
The plywood sector is still virtually stagnant at continuing low prices levels. There is one small sign of a better trend as Indonesian exporters have managed to achieve a small increase in prices for export to Japan.
For other Far East board products, MDF and particleboards, prices are largely unchanged, with domestic prices still higher than for export.
In general, except for Thailand, the major buying markets are reported to be quiet. However, the tight log supply in the region has become even tighter and supply is unlikely to manage any substantial increase in the next quarter. There is a marked decline in movements of timber around the region.
