Malaysian plywood manufacturers’ exports of panel products to their key market in Japan have been hit hard by the drastic cut in imports by the Japanese buyers.
Adding to the weak export demand is the soft prices of plywood products which have hurt the bottom line of Malaysian suppliers.
Malaysian manufacturers are also losing their market share in Japan to Indonesian plywood manufacturers and Japan’s softwood plywood producers.
Plywood manufacturers in Sarawak have raised the prices of their products to offset the high production costs brought about by the steep hike in timber premium as well as rehabilitation and development cess, thereby making their products less competitive in the export market.
In the first six months of 2020 (1H20), Japan’s plywood imports volume fell by 28% compared to 1H19, with Indonesia and Malaysia accounting for more than 80% of that country’s total plywood imports.
Malaysia’s plywood exports to Japan was down to 399,500 cubic metres in 1H20 from 462,200 cubic metres in 1H19 or decline by about 13.5%, according to Japan Finance Ministry’s data.
“In June, arrivals from Malaysia were down 26% compared to May (2020) and year-on-year, June imports were around 13% down.
“In contrast, the volume of June imports from Indonesia was around the same level in May and were marginally lower than in June 2019, ” said International Tropical Timber Organisation (ITTO) in its latest Tropical Timber Market Report (Aug 16-31).
Indonesia has overtaken Malaysia in exporting 407,400 cubic metres of plywood to Japan in 1H20 from 380,200 cubic metres in 1H19.
Japan also imports plywood products from China and Vietnam.
According to WTK Holdings Bhd, its plywood revenue in the April-June 2020 quarter (2Q20) slumped by 30% because of weaker demand from Japan, which was affected by the slowdown of construction and new houses.
Coupled with a 89% plunge in logs revenue in 2Q20, WTK recorded a sharp drop in timber turnover to RM49mil (2Q19: RM111.7mil) and widened segment’s loss to RM13.8mil (-RM7.4mil).
Going forward, WTK said the demand for its plywood from Japan and logs from key market India is expected to remain soft.
Similarly, Jaya Tiasa Holdings Bhd said the group’s timber business incurred a higher operating loss of RM8.98mil in the latest quarter from a loss of RM1.66mil a year ago due to weaker average selling prices of plywood and all other timber products.
Ta Ann Holdings Bhd reported a 11% drop in average selling prices for plywood in 2Q20. The group also recorded 19% and 23% decline respectively in log export volume and average selling price in 2Q20.
In 1H20, Ta Ann posted a drastic drop in the segment’s profit from its timber business to RM279,000 from RM13.2mil in 1H19 despite an increase in revenue to RM151.7mil from RM148.4mil.
However, Ta Ann said as the group has secured full certification of forest concessions this year, it is confident of having a much stronger competitive edge in marketing of both the exports of logs and timber products, particularly in Japan where its plywood export volume is always well absorbed.In 1H20, Japan remained the single largest importer of plywood from Sarawak, absorbing 357,613 cubic metres (out of the state’s total export volume of 567,087 cubic metres) worth RM770mil (RM1.12bil), according to export figures from Sarawak Timber Industry Development Corp (STIDC).
Yemen, Taiwan and South Korea are other major buyers of plywood products from Sarawak.
According to Japan Lumber Reports (JLR), as imported the plywood inventory in Japan is running low, the imported volume has improved since July 2020. June’s supply of imported plywood stood at 180,460 cubic metres and dipped below the 200,000 cubic metre mark for the first time in four months.
“With an uncertain future market, the importers made very little purchase since April. As September is the interim book closing month, importers try not to increase their orders to balance.
“Therefore, the (plywood) arrivals seem to remain low for the coming months, ” said JLR, a trade journal published every two weeks and reproduced by ITTO’s bimonthly publication.