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)