Log production decline, high production cost spelling an end to plywood industry in Sarawak
KUCHING: The Sarawak Timber Industry Development Corporation (STIDC) is aware that high cost of operations may be among the factors leading to the alarming rate of plywood mills closing down in Sarawak.
Its general manager Hashim Bojet said the state agency is aware that many plywood mills – including those from Sarawak’s ‘Big Six’ timber companies – have reduced their production capacity, with some going for full closure.
“This is due to decline in natural log production and supply, and the cost of production (is) also on the high side,” he said when prompted for comments on Thursday on the local plywood industry winding up as a sunset industry.
However, he was not able to provide figures off hand on how many plywood mills are ceasing their operations this year.
On Thursday, Chief Minister Datuk Patinggi Abang Johari Tun Openg called upon plywood industry operators to shift to a ‘higher level’ rather than continue their export business in order to survive.
Acknowledging that the local plywood industry is a sunset industry, he said: “You don’t have to export plywood all the time. You export the furniture, because plywood can be a raw material (which) can produce high- or added-value products.”
Abang Johari also suggested that they could make use of the raw material (plywood) to come up with new products.
According to Hashim, the Sarawak government has allowed industry players to import logs in order to help the primary industry such as plywood, veneer and sawmill.
He said other countries such as India, Vietnam and Japan are implementing similar policies as a move to sustain the aforementioned primary industry.
“I don’t have the figure now (on plywood mills shutting down this year) but I would say they are cutting down at least 30 per cent of their production capacity.”
He conceded that these industry players are struggling because of increased operational costs.
Hashim said if they imported logs to add value to their products, this should be adding value to them.
“They have to consider both reducing their operation cost and cutting cost, or increase productivity and mill efficiency, and at the same time going for high-value products,” he added.
He admitted that embracing change for a big scale operation and with high investment to migrate to a new set of technology “is not an easy move”.
“It takes time also, at least two to three years to adopt.”
Asked if local industry players were slow to embrace change, he said: “They are moving toward it. They have to do market analysis, type of raw material and sustainability of material and which technology.”
Hashim then advised industry players in Sarawak “to come back to the government to share their issues and work together to see the workable solution”.
“The industry players have not come back to the government to present their issue with current challenges,” he said, assuring that the government would look into if they brought forward to the ministry concerned.
He said he had always mentioned to the Sarawak Timber Association (STA) that they ought to approach the government for win-win solutions.
“Have to work as a team, not as an individual,” added Hashim.
‘Industry still facing severe hardships’
Hardships faced in the timber sector have been highlighted many times this year, especially during STA’s Annual General Meeting (AGM) in March.
During this meeting, STA members raised concerns over the recently proposed forestry policies aimed at transforming Sarawak’s forestry sector.
“STA feels that the review of the forestry policies must be grounded on accurate and updated baseline data reflecting on the actual situation of the industry and supported by feasibility studies in order for comprehensive policies to be drawn up for effective development of the forestry and timber industry in Sarawak,” it said in a statement.
“This very fact was obvious in the Dialogue Session held right after the AGM, where even though members acknowledge the importance of shaping the industry to have the capacity to innovate and upgrade, it is quite impossible for such positive change to be justifiable or take place if the challenges faced by the industry are not well understood and rightfully identified.
“Indeed, members are more aware of the current situation as they are struggling hard to deal with these complex challenges on a daily basis in order to keep their operations afloat.”
One of the Big Six, in a phone interview, said the only plywood mill it is still operating at present, is expected to shut down within this year.
“It is now still operating but it is closing down in three months’ time. We are losing money like mad.”
Sarawak’s six major timber groups are Rimbunan Hijau, Samling Global Ltd, WTK Holdings Bhd, Shin Yang Forestry Sdn Bhd, KTS Forest Plantations Sdn Bhd and Ta Ann Holdings Bhd.
According to the industry insider, the only plywood mill left is running at 10 per cent of its designed capacity. The company had two plywood mills, which were shut down in 2005 and 2011 respectively.
He said the plywood industry had been facing severe challenges for many years and the situation grew worse in the last three to four years.
He added that the increasing timber premium had constituted to additional costs of operation among industry players in Sarawak.
“Sabah does not have this (increased premium).
“We cannot even compete with our neighbouring state. The additional costs are burdening the industry,” he lamented.
Another reason that results in the downfall of Sarawak’s plywood industry is the decline of raw material supply, he said, attributing this to the government’s policy of limiting the number of permits.
The log production in Sarawak had decreased over the years, he said, stressing: “Log production is reducing every year.”
On the note that Hashim had advised industry players to import logs to stay in business, he said: “It depends on where to import as well as the quality of logs.”
He said industry players could be sensitive about the quality of logs given that different grades of logs would come with different usage.
“You talk about value-added products, which is to say, the raw material must be of good quality.
“Even if we import logs, our mills are still shutting down.
“When I import logs, what do I do with my mill?
“Hence, importing logs does not solve the problem,” he added.