Agonizing South Sea Tropical Plywood Manufacturers

Plywood manufacturers in Malaysia and Indonesia are in tough spot with declining orders from overseas markets and spiraling cost of logs.

Since spring of 2017, plywood prices in Malaysia and Indonesia soared to record high level by log shortage while the market in Japan continued sluggish log supply in Indonesia started recovering gradually since fall of 2018 and plywood export prices weakened but the demand in other markets like Korea dropped by trade conflict between China and the U.S.A.

Some plants in Indonesia restarted manufacturing concrete forming panels for Japan since last February and March after the supply of concrete forming panels from Malaysia in last two years decreased by log shortage in Sarawak.

Malaysian plywood manufacturers continued bullish despite softening trend of Indonesia plywood prices but in
last two to three months, export prices of some items are adjusted downward after log prices weakened after the
rainy season was over. Log prices of about 850 ringgit per ton for last two years are now down to about 750 ringgit.

Production of plywood mills dropped by lack of orders so mills profitability has not improved despite lower log cost. Mills continue asking to reduce log prices to log suppliers but log production cost remains high so further reduction is unlikely.

Mills accept low priced orders from the Middle East market to maintain production but low operation continues.

Logs, plywood and palm oil are three major items for wood industry in Sarawak, Malaysia but export of logs and palm oil continues slow. Market of palm oil is soft worldwide and log export shifted to PNG.

Import plywood market in Tokyo continues weak and warehouses in Tokyo Bay ports are plugged with plywood. Increasing container cargoes results in congestion as unstuffing takes longer. This also influences unloading works of bulk carriers.

Shipping companies bear demurrage and they are reluctant to carry plywood now. They are collecting surcharge from plywood manufacturers as they sell C&F base. Japanese importers face difficult decision to purchase future cargoes since it takes more time from placing orders to delivery to the customers by port congestion.