Log supply expected to drop by 25 percent

JAKARTA (JP): Indonesia's log supply might decline by as much as 25 percent this year due to a drop in timber companies' logging activities, according to the Indonesian Forestry Society (MPI).

MPI's executive director Kristiyono Fajari said on Thursday that the 25 percent drop in the log supply was also attributed to the heavy rainy season and the postponement of timber companies' logging contracts.

"Many timber companies have reduced their annual logging plan due to the decline in demand and low prices of plywood on both local and international markets earlier this year," he said.

Kristiyono said the heavy rainy season in the country, caused by the La Nia weather pattern, has disrupted logging activities and log transportation from the logging area to timber mills.

He added that at least 186 timber companies whose logging contracts had ended were still awaiting the government's decision on whether they would be extended.

On the other hand, demand for logs is currently very high due to plywood companies' improving production activities in the past three months.

"The world demand for Indonesian plywood is currently high but most of local plywood producers could not meet new contracts due to the lack of log supply," he said.

MPI's chairman Sudradjat DP said separately on Thursday that the scarcity of logs would hamper Indonesia's efforts to meet the US$3 billion in foreign exchange earning target from plywood exports this year.

He said that the Association of Indonesian Wood Panel Producers (Apkindo) had initially targeted earnings of $3 billion from plywood exports this year, but it was likely to reach only $2.5 billion.

Sudradjat said that Indonesian plywood was currently being sold at between $300 to $320 per cubic meter in China, an increase from $270 in August. It is currently sold at over $300 in Japan from $250 two months ago.

Plywood, a wood panel product, is Indonesia's second largest non-oil and non-gas foreign exchange earner after textiles and textile products.

Last year, the country's plywood exports totaled 7.85 million cubic meters worth $3.58 billion.

Kristiyono said that the government's recent decision to cut the export tax on logs to 30 percent from 200 percent has had no big impact on the supply of logs on the domestic market because many Indonesian timber companies were currently reluctant to export their logs as local sales were now more profitable.

He said that the ministry of forestry and plantations has issued log export licenses to 20 of the 43 companies that had applied. The licenses will allow the companies to export a total of 460,000 cubic meters of logs.

"But so far only less than 20,000 cubic meters of logs have been exported," he said.

Kristiyono said logs were currently priced at around $85 per cubic meter in local market, while the price on the international market was currently $110 per cubic meter.

"To gain profit from exporting logs, timber companies have to sell their logs at over $130 per cubic meter because with the current export tax, timber companies had to pay $45 for every cubic meter of logs they exported," he said.

The Chairman of the Association of Indonesian Forest Concessionaires Adi Warsita Adinegoro said the government should only allow log exports from areas that have an abundant supply but lack processing industries, such as Irian Jaya and Maluku.

The types of logs which it is permissible to export should be limited to those which are not used by local plywood companies, such as Merbau he added.

He said that logs from areas where wood processing companies are concentrated, such as Central and East Kalimantan, should not be exported. Most logs from these areas are used to manufacture plywood.

Previously, the government technically banned log exports through the use of a 200 percent export tax. The tax was cut to 30 percent in June this year to comply with the program of reform agreed with the IMF. (gis)