KUCHING: Malaysia’s harvesting volume in the timber industry has decreased significantly for three consecutive months in October 2024.
This is due to weak domestic and international demand as well as unfavourable weather, according to Global Timber Index (GTI) Producers Report for October.
“In addition, the Malaysian government has imposed restrictions on harvesting in order to fulfil its commitment to forest conservation, which also contributed to the decline in harvesting,” said the report.
GTI-Producers is a specialised prosperity index for International Tropical Timber Organisation (ITTO) producers, reflecting the development trend of timber harvesting and primary processing in producers represented in the eight pilot countries.
These countries are Indonesia, Malaysia, Thailand, Gabon, Republic of Congo, Ghana, Brazil and Mexico.
In 2022, the total production quantity of logs and sawnwood in these eight countries was 289 million cubic metres (cu m), accounting for 63.7 per cent of the 37 ITTO producers’ total quantity.
In October 2024, the GTI-Malaysia index registered 22.8 per cent, a decrease of 6.2 percentage point from the previous month, was below the critical value (50%) for 24 consecutive months. This indicated that the business prosperity of the superior timber enterprises represented by the GTI-Malaysia index shrank from last month, and the contraction had become more significant, said the report.
As for the 11 sub-indexes, the inventory index of finished products and the purchase price index were above the critical value while the remaining nine sub-indexes were all below the critical value.
“Compared to the previous month (September), the indexes of existing orders and purchase price increased by 5.0-5.5 percentage points; the indexes for export orders, inventory of finished products, purchase quantity, and employees were unchanged from the previous month; and the indexes for harvesting, production, new orders, inventory of main raw materials, and delivery time declined by 5.0-28.6 percentage points,” said the report.
The timber enterprises faced a host of challenges, and the main ones included decrease in orders, shortage of plywood demand for export and the demand for wood not enough.
Other challenges were limited supply of raw materials, and cost of raw materials (woodwaste) were high, strong ringgit versus US dollar, which was unfavourable for export market, and freight rates were high.
To mitigate the challenges, timber enterprises had suggested slowdown in production, retain woodchips for local consumption, and government increase spending on building and infrastructure expansion so as to increase the consumption of building materials.
The report said Sabah exported its first batch of European Union Deforestation Regulation (EUDR)-compliant plywood to Poland recently.
And according to Sabah Forestry Department’s chief forest conservator Datuk Fred Kugan, Sabah is preparing to enhance its timber legality assurance system and fully integrate EUDR requirements by February 2025.
Overall in the pilot producing countries, the GTI-Producers registered 43.7 per cent in October, and had stayed below the critical value for six consecutive months, indicating a continued downturn for the overall prosperity of the timber harvesting and primary processing industries in the pilot producing countries.
In Asia, the GTI index for Thailand registered 44.2 per cent, and its volume of timber harvesting declined for two consecutive months, whereas the production remained relatively stable and volume of new orders slightly decreased.
“In Africa, the GTI indexes for the Republic of Congo (ROC), Ghana and Gabon were at 48.1%, 48.0% and 35.4% respectively, all in the contraction range below the critical value, however, the contraction in the timber markets of the three countries had all eased.
“In Ghana, there was a slight decline in harvesting, production and orders. In Gabon and ROC, the volume of harvesting had decreased by two consecutive months. However, the production volume held steady when compared to the previous month.
“On the demand side, ROC’s export performance was relatively stable while the domestic market contracted slightly. As to Gabon, both domestic and international demand had been declining for several months.
“Due to insufficient demand in the global timber market, rising raw materials prices, and limitations in local logistics facilities, African enterprises still faced significant operation and production pressures,” pointed out the GTI-Producers report.
In Latin America, the GTI indexes for Brazil and Mexico registered 43.2 per cent and 33.9 per cent respectively, both in the contraction range below the critical value. The timber sector in both countries saw a decline in harvesting, production and orders when compared to September. The main reason was unfavourable weather that affected the efficiency of harvesting and insufficient market demand, resulted in reduced orders and a slowdown in enterprises’ production.
Additionally, the timber sector in both countries faced logistics challenges. For example, the GTI-Brazil enterprises reported slow export clearance and high maritime freight costs. And in Mexico, the increase in traffic had strained capacity at seafreight gateways and pushed average import container dwell time to 11 days, well beyond the seven-day grace period before storage charges kick in, said the report.
