Unsold plywood stock totals 1.2 million cubic meter

JAKARTA (JP): At least 1.2 million cubic meters of unsold Indonesian plywood have accumulated in warehouses over the past two months due to a sharp drop in demand of plywood overseas, the Association of Indonesian Wood Panel Producers (Apkindo) has said.

Apkindo executive director A. Tjipto Wignjorajitno said Monday the sluggish demand of plywood overseas had resulted in the increase in plywood stocks.

He said demand for plywood from South Korea and Japan, the country's main buyers, dropped sharply last year because their property sectors, the main users of plywood, were severely hit by the currency crisis.

Tjipto said the sluggish demand had also resulted in the falling of the price of plywood overseas.

"The price of Indonesian plywood in China was US$220 per cubic meter last month, a sharp drop from an average price of over $400 (per cubic meter) last year," he said.

He said plywood prices in Japan had dropped by about $40 from $440 per cubic meter, while plywood prices in European countries and the United States had fallen 30 percent since late January.

Tjipto said the average price of Indonesian plywood on the world market was $500 in the first half of last year, but that it had dropped continually since then.

"If the prices continue to fall, the export value of Indonesian plywood this year is expected to fall to $2 billion this year, or about 50 percent from an average of $4 billion per year," he said.

But he added that the estimate was based on an assumption that plywood export volumes would reach the same level as last year's. If the export volume also drops, the value would be lower than $2 billion.

Indonesia is currently the biggest producer of plywood in the world. The country turns out about 10 million cubic meters of plywood annually.

Last year, the country exported 7.58 million cubic meters of plywood worth $3.58 billion.

He said the market situation would slowly kill Indonesian plywood producers as their production costs had exceeded plywood prices.

"Plywood production costs are currently $150 per cubic meter, excluding log prices and transportation costs. Logs alone cost $70 to $100 per cubic meter, while shipment costs an average of $35 per cubic meter," he said.

He added that many plywood companies were now selling their output only to maintain cash flows and that the sales did not yield profits.

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