KUCHING: Indonesian timber companies are faced with transportation woes to bring their logs to the market using river channels due to the extreme dry season.
“The lowering of river water levels due to the extreme dry season posed a problem because it made it difficult to transport logs when some enterprises mainly relied on water transportation,” according to Global Timber Index (GTI-Indonesia) in its monthly report for October 2023.
To address the receding river levels for log transportation activities, the GTI-Indonesia enterprises suggested that companies could adjust the schedule of production and transportation.
Another challenge faced by these enterprises is the excessive low prices of logs in the domestic market. To cope with this problem, the GTI-Indonesia enterprises suggested the government may establish reference prices for logs in the domestic market so as to stabilise the log prices.
It could also provide incentives for processed wood products sourced from sustainably managed and/or legal forests. Besides, log production volume has fallen as the heavy equipment used for timber harvesting activities could not be fully operational as many were in the process of maintenance and parts replacement.
In October, the overall operating conditions of Indonesia’s timber industry declined, but the decline has eased according to the report.
Besides the log transportation problem, the enterprises also faced with higher production cost due to the sharp increase in fuel prices.
The 20 to 30 per cent rise in production costs has further increased the burden on the enterprises. In October, the GTI-Indonesia index registered 46.3 per cent, an increase of 5.3 percentage points from the previous month, was below the critical value (50 per cent) for three consecutive months.
This indicates that the business prosperity of the superior timber enterprises represented by the GTI-Indonesia shrank from last month.
However, the contraction has eased. As for the GTI-Indonesia subindex in October, new orders, export orders and purchase quantity indexes were above the critical value, indexes of existing orders and raw materials inventory were equal to the critical value while the remaining six subindexes — harvesting, production, inventory of finished products, purchase price, employees and delivery time — were below the critical value.
GTI-Indonesia enterprises also reported several other main challenges including overseas orders for processed wood have dropped and some enterprises mainly relied on orders from domestic customers.
“The plywood markets in several countries (especially Japan) as the main export destinations were sluggish, leading to a significant decrease in log orders from the plywood industry.
“Weakening exports had led to lower wood demand from industry as well as decreased log production,” pointed out the GTIIndonesia report.
To address the various problems, GTI-Indonesia enterprises suggested companies should adjust production according to buyers’ needs to maintain the balance between supply and demand, and that they should monitor developments in the global wood products market and continue to communicate with overseas buyers.
“To address the increasingly expensive fuel prices, enterprises should make efficient use of heavy equipment that is strictly adjusted to the amount of production.”
Also suggested was to promote the absorption of natural forest raw materials through facilitating sales of downstream processed products. Meanwhile, the GTI-Indonesia report said in the first six months of 2023 (6m2023), Indonesia exported 253,500 tonnes of furniture valued at US$1.07 billion, down by 26 per cent in volume and 31 per cent in value as compared to 6m2022.
During the recent Indonesia Furniture and Design Expo 2023 in Banten, the Indonesia President Joko Widodo urged local furniture makers to look for foreign partners as an effort to diversify their participation in international trade.
He said the government would continue to encourage the development of the furniture industry, including supporting internet marketing to make it more competitive in the domestic market while facing the imported products.
For the purpose of increasing enterprises’ production efficiency and processing precision, the Association of Indonesian Furniture and Handicraft Industries recently announced that it would cooperate with China National Forestry Machinery Association to promote appropriate wood processing technologies for the furniture industry
