Plywood firms advised to restructure plants
Plywood firms advised to restructure plants
JAKARTA (JP): The government, concerned with the steady decline in plywood exports, told manufacturers yesterday to restructure their industrial facilities to adjust to the decline in supplies of raw materials.
Director General of Forest Utilization Titus Sarijanto told a press conference here yesterday that restructuring will be a necessity for plywood companies wanting to survive in the future. "You restructure, or you go broke," he said.
Titus made his remarks in response to recent press reports that 50 plywood companies were on the brink of bankruptcy due to difficulties in obtaining raw material.
The reports predicted that this trend would further hinder the growth of Indonesia's non-oil exports, the rate of which has declined in the past few years.
Exports from plywood in particular, dropped by 11.95 percent last year to US$3.7 billion from $4.2 billion in 1993, according to the Central Bureau of Statistics.
In the first seven months of this year, they fell again by 14.15 percent to $1.98 billion from $2.3 billion in the same period of last year.
Plywood manufacturers blame the decline on the commodity's low price on the world market.
"It is true that plywood prices are now declining (on the world market) and it is likely that manufacturers which don't have enough timber supply will get in trouble," Titus said yesterday.
He calculated that wood-based companies which do not have forest concessions must currently buy logs at US$115 per cubic meter. Based on the assumption that two cubic meters of log is needed for every cubic meter of plywood, a plywood manufacturer must buy at $230 worth or logs for each cubic meter of plywood he produces.
Other expenses are production costs ($126), transportation costs ($20) and mandatory forest fees and marketing costs ($40).
The total, $416, will not mean profit if plywood prices drop to as low as $350 or $400 per cubic meter, as is currently the case on the world market.
Titus said that if a plywood firm has a forest concession, which guarantees the manufacturer's raw material supply, log prices will reach only $50 per cubic meter, or $100 for every cubic meter of plywood produced.
Relocation
Apart from restructuring the industrial facilities of plywood companies, Titus said, the Ministry of Forestry has also asked them to relocate their factories closer to the sources of raw materials.
"Factories should be closer to timber sources, such as in Irian Jaya and other parts of the eastern Indonesian region, to cut back expenses," he said.
Asked to explain the relationship between the current situation and the boom in plywood prices in 1993, Titus said plywood firms should be the ones to answer.
"It's most likely that profits gained by the plywood firms (in 1993) have not been re-invested to develop timber estates. As a result, they now suffer a shortage of raw materials," he said.
Titus said the Ministry of Forestry currently requires all forest concessionaires to submit financial reports, "so we know where all their money has gone to."
The government recently granted logging permits for 22.5 million cubic meters of timber for 1995-1996.
Indonesia has approximately 100 wood-based companies with a total processing capacity of 44.5 million cubic meters of timber. (pwn)