Domestic plywood industry maybe dying, analist says
Domestic plywood industry maybe dying, analist says
JAKARTA (JP): A foreign securities analyst warned yesterday that Indonesia's plywood industry, which experienced a significant drop in export revenues last year, might not have a sustainable future in the long run.
"Judging from the developments in plywood prices throughout 1994 and the likelihood that many plywood makers are thinking to move into other wood-based industries, I fear that the (Indonesian) industry will die in the long run," the executive, who requested anonymity, told The Jakarta Post yesterday.
When asked about his term "the long run", the securities analyst -- who specializes in price developments in the shares of listed Indonesian plywood firms -- said: "Maybe a decade or a little bit longer."
No executives from the Association of Indonesian Wood Panel Producers (Apkindo) were available for comment yesterday.
According to regulations, all international transactions in plywood trading are controlled by Apkindo.
Indonesia produces about 10 million cubic meters of plywood annually, most of which is exported to Japan, South Korea and Taiwan.
The Ministry of Finance revealed last week that export revenues from the plywood sector, a major foreign currency earner among Indonesia's non-oil exports, fell by 9.0 percent during the January-September period of last year to US$2.8 billion over the corresponding period of 1993.
It was only last month when Minister of Industry Tunky Ariwibowo announced that plywood exports dropped by 0.8 percent to $3.78 billion in the January-August period of last year from the same period in the previous year.
The securities analyst, who works for a foreign brokerage firm, also cited that Indonesia's two listed plywood manufacturers, PT Barito Pacific Timber and PT Sumalindo Lestari Jaya, have reported significant drops in profits as well as poor performances on the Jakarta Stock Exchange.
Barito announced in June that its profit level dropped by 36 percent to Rp 74 billion (about $33 million), while Sumalindo reported a 29 percent decline in its profit to Rp 25.6 billion for the first semester of last year.
"It's clear that their poor performances were caused by the low prices of plywood," said the analyst.
He also noted that plywood is currently priced at about $380 per cubic meter, indicating a 32.14 percent drop from $560 in the third quarter of 1993.
The analyst argued that the drop was caused by low demand from the recession-stricken Japan and increased supply from Malaysia.
"The Malaysians have been shipping a significant amount of used machines from Taiwan and South Korea into their territory so they can now flood the plywood market at heavily discounted prices," he added.
No trade officials at the Malaysian embassy here were available for confirmation yesterday. Early reports, however, noted that Malaysian plywood exports to Japan increased to 500,000 cubic meters in 1994 from 300,000 in 1993.
Apkindo
The analyst warned that apart from recession and competition, the Indonesian plywood industry has also been undermined by Apkindo, whose intrusions could interfere with an improvement in prices due to the recovery of the Japanese economy.
"Many plywood buyers now regard Apkindo as monopolistic and not transparent in its operations. This may endanger Indonesia's market share in the Japanese or South Korean markets," he added.
The issue is now whether Apkindo will adopt new strategies to anticipate changes in the world economy, he said.
The analyst warned, however, that despite a better world market, the possibility of oversupply might still burden plywood prices.
A trade official at the Japanese embassy told the Post that Indonesia's share in Japan's total plywood imports remained at around 84 percent last year, almost the same as 10 years ago.
A previous report said that in 1994 Japan imported about 4.04 million cubic meters of plywood, of which 3.3 million cubic meters were imported from Indonesia.
No figures of Indonesia's share in the South Korean plywood market were available.
While the decline in export revenues was taking place in the latter half of last year, Apkindo chairman Mohammad (Bob) Hasan insisted that the decline was entirely caused by economic recessions, mostly in China and South Korea.
Hasan also insisted that the trend was only going to be temporary and export revenues in 1994 would be the same as in 1993.
In contrary to Hasan's statement, the Statistical Year Book of Indonesia 1993, a collection of data from 1989-1993, showed that China is not a major importer of Indonesian plywood.
This contradiction proved that Apkindo is not transparent, said the securities analyst yesterday.
"I do not understand why Apkindo and its members insist that China plays a major role in contributing to Indonesian plywood revenues," he added.
Float
The analyst also said that the major reason why plywood makers aim to float their shares on the capital market is to help finance their plans to move into other wood-based industries.
"Most plywood makers are cash cows -- they do not need funds to stay in this business," he said.
None of the executives from the listed plywood firms were available for confirmation.
Earlier news report, however, indicate that Sumalindo is currently investing at least $180 million to build several medium density fiberboard plants.
Barito Pacific Timber has also invested in petrochemicals, evidenced in their equity participation in PT Chandra Asri Petrochemical Center and PT Tri Polyta Indonesia. Barito is also building an elemental chlorine-free pulp plant in Sumatra, a project valued at around $1 billion.
Three other plywood makers are reportedly planning to float their shares on the local stock market soon. They include PT Kiani Lestari, the Surya Dumai group and PT Artika Optima Inti. (hdj)