Plywood market may not improve in the near future
Plywood market may not improve in the near future
By Hidayat Jati
JAKARTA (JP): Major plywood manufacturers have expressed
doubts about a recovery in Indonesia's exports in the near
future, citing keener competition from other suppliers, notably
Malaysia, and importers' resentment about Indonesia's export
rules.
"According to our market analysis, our plywood exports are not
likely to pick up in the near future," said Irtamazati Husna,
corporate secretary and public relations officer of the publicly
listed PT Sumalindo Lestari Jaya yesterday.
"The main reason, besides the keener competition from
Malaysia, is the foreign buyers' dissatisfaction with the way
Indonesia markets its plywood," Irtamazati told The Jakarta Post.
Under the "sole-exporter" system enforced by the Indonesian
Wood Panel Association (Apkindo), plywood producers cannot export
their products directly but must sell through trading arms
appointed by Apkindo in each of the major importing countries or
regions.
Official data shows that Indonesian plywood exports fell by
nine percent between January and September last year, from the
corresponding period in 1993, to US$2.8 billion..
Indonesia, the world's biggest plywood supplier, produces
about 10 million cubic meters annually, most of which is exported
to Japan, South Korea and Taiwan.
Apkindo denied that its sole-exporter rules were the main
cause of the decline, while conceding that the unpopular system
was one factor. The major causes, according to Apkindo, were
economic recession in major importing countries, on one hand, and
increased supplies from Malaysia, on the other.
In apparent contradiction to that view, K. Mazaki, an
executive of Nippindo -- Apkindo's trading arm for Japan -- was
quoted by The Japan Lumber Journal in its Sept.30 issue last year
as saying that "Exports of Indonesian plywood have been in a
great recession and this is not a temporary phenomenon but is
caused by structural problems."
Although Mazaki did not explain what he meant by "structural
problems", he went on to say: "Some millers (in Indonesia) are
cutting their production by between 30 percent and 40 percent and
some others have begun changing businesses or closing down their
mills."
Irtamazari said that plywood capacity in Malaysia had
increased markedly as a number of South Korean and Japanese
investors had relocated their plywood mills to that country.
Plywood's future
Chairman of Apkindo, Mohammad (Bob) Hasan, was quoted by
Republika yesterday as denying that the plywood industry was
dying, as had suggested by one analyst.
"The decline in export earnings last year occurred only in the
case of one type of plywood, which is raw plywood," he said.
An industry analyst said early this week that the poorer
export performance last year would likely prompt major millers to
diversify into other products such as medium-density fiber board.
Interestingly, Bob Hasan himself, who controls plywood company
PT Kiani Lestari, was quoted yesterday by Bisnis Indonesia and
Media Indonesia as saying that he plans to invest $20 million in
a furniture mill and $900 million in a pulp plant, after his firm
has gone public.
Hasan stated that the planned public listing of Kiani Lestari
is has been postponed for the tome being, because of "the
unfavorable condition of the local and international capital
markets."
In a related development, an executive of the Japan Plywood
Wholesalers' Association was recently quoted by the Japan Lumber
Journal as saying that "the markets are full of stocks and users
are less interested in purchases. Such substitutive material as
MDF (medium density fiber board) has been making debut and a
phenomenon of leaving from the plywood is taking place," the
journal quotes T. Takada as saying.
Irtamazati confirmed yesterday that Sumalindo was planning to
diversify into other wood panel products, namely medium density
fiber board.
She said that other plywood makers would also be investing in
medium density fiber board or in pulp mills because log supplies
from natural forests have been decreasing.
Data compiled by the Investment Planning Board showed, she
said, that the government had approved 15 medium density fiber
board projects with a total investment commitment of around Rp 2
trillion (almost $1 billion) and a total capacity of around 1.95
million cubic meters.
" As hardwood plywood prices increase due to declining log
supplies, consumers will prefer cheaper substitutes such as
medium density fiber board, since its quality is not greatly
different from ordinary plywood," Irtamazati added.
An executive from another leading plywood firm, who requested
anonymity, said yesterday that his company would diversify into
wood chips as its core business.
He also voiced concern that Malaysian producers who have
flooded the market have sold their heavily discounted plywood
under contract lasting up to three years.
"And under Apkindo's export monopoly system, we do not even
know who our costumers are," he said.
The executive maintained, however, that there would always be
a market for plywood because some consumers would continue to
prefer products with a higher content of natural wood.