KUCHING: The demand for Sarawak logs this year should remain robust due to global log shortage which in turn would sustain high average selling prices.
Affin Hwang Investment Bank Bhd (Affin Hwang) in a report yesterday said the state’s log supply would remain tight due to the diminishing natural resources as well as more stringent environment safeguards that were put in place for log exports.
It also expects demand for Sarawak’s logs to remain strong given the global supply constraint.
“Sarawak’s total logs exports last year climbed by nine per cent year-on-year (y-o-y) to 3.05 million cubic metre. Correspondingly, the value of the total logs export also increased by 19.1 per cent y-o-y to RM2.03 billion,” it noted.
As for export destination, Affin Hwang said India remained Sarawak’s top log export destination, accounting for 61.6 per cent of the state’s total log exports last year.
Other destinations include Taiwan which accounted for 11.4 per cent of the total log exports followed by China (9.4 per cent) and Indonesia (5.6 per cent).
Furthermore, total log production by the state last year increased by 6.1 per cent y-o-y to 8.72 million cubic metre.
Going forward, the research firm hopes that 2015 log production volume would be on par compared with last year due to improving logging activities.
As for companies under the research firm’s coverage, Ta Ann Holdings Bhd (Ta Ann) and WTK Holdings Bhd’s (WTK) 2014 log production was up by 25.6 per cent and 14.3 per cent y-o-y respectively to 511,022 cubic metre and 487,709 cubic metre.
However, it noted Jaya Tiasa Holdings Bhd’s (Jaya Tiasa) 2014 log production declined by 5.4 per cent y-o-y to 1 million cubic metre partly attributed to the monsoon season last year.
As for plywood demand, Affin Hwang predicted that it will remain soft this year due to the slowdown in construction of housing in Japan.
The research firm noted the slowdown in Japan’s construction of homes last year has caused a drop in demand for Sarawak’s plywood.
It observed that Sarawak’s total export of plywood fell by 9.9 per cent y-o-y to 2.3 million cubic metre last year noting that plywood exports to Japan accouted for 56.8 per cent of the state’s total plywood export.
Besides that, plywood demand from South Korea and Taiwan also declined by 10.1 per cent and 12.8 per cent respectively to 239,351 cubic metre and 223,575 cubic metre.
Given such a scenario, Affin Hwang expects plywood demand from Japan this year to slow down slightly.
Nevertheless, the research firm does not foresee a sharp decline for the demand of plywood as Japan will continue to require plywood especially for the country’s on-going reconstruction and its preparation for hosting the 2020 Olympics Games.
On the bright side, the research firm observed the average selling prices for concrete-panel plywood and floor-base plywood have increased slightly by 3.4 per cent and 1.1 per cent y-o-y respectively partly due to global shortages of logs.
Thus, it expects the average selling price of plywood to decline slightly attributed to the softening demand but the impact on the earnings of Malaysian timber companies could be partially offset by the strong US dollar.