Many timber firms facing closure

Many timber firms facing closure

JAKARTA (JP): Almost half of the country's timber-related
companies may call it quits due to growing uncertainty over their
business, according to the Indonesian Forestry Society (MPI).

MPI's chairman Sudradjat DP said on Tuesday that at least 40
percent of the country's timber-related companies planned to
switch to more promising business sectors such as plantations.

He said depletion of the country's forest resources, the
soaring prices of timber and wood-processing equipment, high
capital costs and the government's wavering policies were the
major reasons why they were mulling leaving the industry.

"Many timber companies here no longer expect that their
logging contracts will be extended. They are preparing to enter
new businesses which they consider have better prospects, such as
plantations," he told a media briefing.

He added that the government's plan to limit ownership of
forest assets had raised concerns because wood-processing
industries would no longer have a sufficient log supply if the
legislation was introduced.

"We support the government's plan to change the system in
managing the country's forests, but it should be done quickly to
give certainty to forestry businesses."

Indonesia currently has 421 timber companies, 1,701 sawmill
companies, 115 plywood companies and six pulp and paper
companies.

He added that at least 156 timber companies whose logging
contracts had ended were still awaiting the government's decision
on whether they would be extended.

"If the government wants to sever the contracts, and offer the
areas to the public, it must do it quickly," he said. Delays, he
added, may be too costly for the companies because they had to
keep their heavy equipment idle in the forest until the
government made its decision.

Plywood prices

Sudradjat also said that overseas demand for Indonesian
plywood had shown signs of improvement with increases in orders
from several Asian countries, the United States and Europe.

He said Indonesian plywood producers would no longer be able
to take new orders for this year.

"I have checked with all of Apkindo's (the Association of
Indonesian Wood Panel Producers) member companies. Most of them
have said they have closed their doors to new contracts until the
end of December. But they will receive new orders for next year's
delivery."

Apkindo chairman Abbas Adhar said prices of the Indonesian
plywood, especially in China and Japan, were also encouraging.

"Indonesian plywood is currently being sold at over US$300 per
cubic meter in China, an increase from $220 in June and $270 in
August. The current price, however, is still lower than last
year's average price of $400 per cubic meter."

Indonesia is currently the world's biggest plywood producer,
with 80 percent of its annual output of 10 million cubic meters
exported.

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

Abbas said Apkindo targeted to earn $2.6 billion from plywood
exports this year.

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