He said exports were hit hard by the financial crisis last year but the first quarter of this year had seen a 24.5% growth.
“The building and construction sectors were hit especially bad. The biggest fall in (export) value was plywood which dropped 21.2% to RM4.99 billion from RM6.33 billion, and sawn timber which dropped 23.8% to RM2.34 billion from RM3.08 billion, due to less consumption in furniture manufacturing abroad,” Cheah told The Edge Financial Daily recently.
He said 2009 saw timber exports declining by 14.5% to RM19.49 billion, which was the first industry contraction since 2006. Cheah said value-added finished products such as wooden furniture, mouldings and builder’s carpentry and joinery (BCJ) only suffered single-digit decline last year.
“Last year, timber contributed 3.5% of the total RM553.3 billion export earnings,” Cheah said, adding that the timber industry was the fifth-largest export earner for Malaysia.
“There are more construction activities happening globally and this is a good sign. Our stock levels are coming down and prices have improved. The Japanese market is showing signs of improvement,” said Cheah.
Emerging value-added products
“One of the latest products we are exploring is the glue-laminated (glulam) timber. MTC has formed an interest group to explore this new type of product since 2008,” he said. Glulam is a type of structural product composed of several layers of dimensioned timber glued together and is widely used in the building industry.
“One company in Johor has bought a machine and has begun production for a local construction project,” he said. Cheah said MTC hoped to build a critical mass so that a glulam industry could be established in the next few years.
Apart from timber, MTC is also exploring biomass products due to the abundant supply of the raw material.
“We have a product called the Polypalm which is flooring made of oil palm wood. There is great potential for growth as it is estimated that 13.6 million logs are available annually based on a replanting cycle of 100,000 hectares per year.
“If all the logs are converted into flooring, we would get 680,000 cubic metres of flooring every year,” he said, adding that strong demand for Polypalm was coming from the US. Overseas demand for oil palm wood furniture was also on the rise, said Cheah, due to its exotic grain and formaldehyde-free feature.
“Currently, there are 10 local companies making palm wood furniture. It has only been introduced in the market for three years but it would be a force to be reckoned with once it becomes mainstream due to our abundant resource,” he said.
Forest still abundant in Malaysia
On sustainability, Cheah said Malaysia was still one of the countries in the world with a large percentage of natural forest.
“Malaysia has 58.7% of land area under forest cover compared to other countries like Germany (32%), UK (11.8%) and US (11.8%). Our forests are actually very sustainable.
“There is hardly any illegal logging since the government amended the Natural Forestry Act in 1993 which increased the minimum fine from RM10,000 to RM500,000 and imposes mandatory jail sentence,” he claimed.
Malaysia exported RM19.49 billion worth of timber last year that included products such as logs, timber, plywood, veneer, moulding, medium density fireboard (MDF), BCJ and wooden furniture. Its major markets include the Far East with RM6.5 billion, the US RM2.9 billion and Europe RM2.88 billion.
“Japan is one of our biggest importers of plywood while furniture is big in the US. India is slowly emerging as a potential market as the tariff has been significantly scaled down. We are seeing a lot of demand from the Middle East as well,” said Cheah.
However, he said timber had always been locally funded and the industry needed to be given more attention by the government.
“Timber needs to be looked at in a more favourable manner. Compared to the electronics industry where most profits are channelled back to the US or Japan, 100% of the profits made in timber exports come back,” he said.
Cheah added that the timber industry was expected to contribute RM53 billion worth of exports by 2020 under the National Timber Industry Policy (NATIP).
“This amounts to an annual growth rate of 6.4%. In order to reach the target, we need fresh investments especially in the downstream industry,” he said.
A worldwide platform for timber products
MTC is organising the first MTC Global Woodmart trade exhibition at the Kuala Lumpur Convention Centre on Oct 19 and 20. “We are expecting 80 to 100 exhibitors at the trade centre with representatives from the US, France, UK, China and Malaysia. We are happy to say that 85% of the floor space has been taken up,” he said.
“There would also be an innovative product section where we introduce innovative products such as palm plywood, palm fibreboard and kenaf board,” he said.
This article appeared in The Edge Financial Daily, July 12, 2010.
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