Gloomy outlook for timber product sector

Projected pick-up in plywood demand from Japan the only bright spot going forward

The price outlook for Malaysian timber products remains flattish or negative, with an expected pick-up in plywood demand from Japan the only bright spot going forward, according to industry players.

Housing demand in Japan is expected to recover in September as a stimulus package for house buyers there starts to kick in, says Datuk Wong Kuo Hea, managing director of timber and plantation group Ta Ann Holdings Bhd.

Recently, plywood makers from three countries – Indonesia, Malaysia and Japan – had a meeting and agreed to try to sustain their prices.

“So plywood price has reached a bottom, (but) unfortunately consumption is going down for the next six months. Therefore, the price should be flat,” Wong says.

However, the demand for logs is still strong, particularly from India, but not from China where it is flat, he adds.

The International Timber Trade Organisation (ITTO), in its latest market report, says prices of Malaysian timber products “are not expected to hold,” due to the weakening domestic residential and commercial property industry.

The trade organisation notes that foreclosures of both private and commercial properties are on the rise in the wake of massive layoffs by major multinational companies and a slump in domestic demand.

“At the forefront of the layoffs were suppliers of major building and construction materials and household accessories.

“Prices of residential properties, often propped up by foreign investors and speculators, may actually decline for the first time,” it says.

However, ITTO sees a bottoming out of prices this month in Japan, a key importing market for Malaysian timber products. Prices of timber products in Japan are expected to bottom out after the Japanese Golden Week holidays in early May, it says.

On the global front, data show weakening timber-related exports.

Ghana reported dips in all timber product exports, except plywood, in 2008 while Brazil’s furniture exports to Argentina dropped 51% in the first two months of 2009.

Peru’s wood product exports also fell nearly 50% in the first two months of this year compared with the same period in 2008.

European imports last year showed a marked decline for tropical hardwood products, while China was the only country posting mixed results. China’s export value of wood and non-wood furniture grew 21.5% in 2008 but wood flooring sales declined in the fourth quarter of the same year.

By The Star (by Loong Tse Min)