Apkindo plans to cut plywood production to prop up price

Apkindo plans to cut plywood production to prop up price

Antara, Jakarta

The Association of Indonesian Wood Panel Producers (Apkindo) plans to cut its plywood production in an effort to prop up the commodity's price in the international market which currently stands at US$230 per cubic meter.

"We don't need to increase plywood production if the commodity's price continues to drop. We prefer to lower production to between just five million and six million cubic meters if this could push up international prices," Apkindo's chairman Cahirman Martias said here on Friday.

Indonesia's plywood production this year was expected to range between seven million and eight million cubic meters, he noted.

In 1997, plywood prices averaged $400 per cubic meter but dropped to $230 per cubic meter after the government -- under pressure from the International Monetary Fund (IMF) -- allowed logs to be exported, a policy that sparked log smuggling to neighboring countries.

Increased log smuggling caused Indonesian plywood to lose its competitiveness because neighboring countries had access to lower-priced logs and were thus able to lower their production costs.

Those countries, Martias said, then exported plywood -- even to Indonesia -- at $230 per cubic meter.

In addition to the plan to cut production, the association plans to establish a board to monitor supply of raw material and keep a balance with domestic demand.

"The board is expected to control the balance between supply and demand and at the same time conserve the forests as the source of raw material," Martias said.

Martias said he was optimistic Apkindo would succeed in its efforts to make the world plywood price increase in the next three months if raw material supply could be controlled and log exports were banned.

Moreover, the raw material stock in international markets would only be enough for the next six months.

The association also proposed that the envisaged board to monitor raw material supply be given the authority to endorse plywood exports, in a bid to avoid dumping practices.

Martias said he believed better plywood prices in international markets would encourage the restructuring of the national industry.

Separately, forestry minister M. Prakosa said that the Indonesia's competitiveness in the plywood industry was still low.

The local industry would need two cubic meters of logs to produce one cubic meter of plywood, while industries in other countries needed only 1.6 cubic meters of logs to produce the same amount of plywood.

The minister said efficiency needed to be improved as the government would also lower the limit of trees that could be cut from 20 million cubic meters to 15 million cubic meters a year.