KUCHING: The implementation of the new minimum wage and increase in timber harvest tax from last month have further driven up the export prices of Sarawak logs and plywood.
Higher minimum wage and harvest tax have pushed up production cost of logs and plywood, which is labour intensive.
“By increased minimum wage and timber harvest tax, production cost of plywood would climb by US$15 per cu m.
“Plywood manufacturers in Sarawak need to increase export prices by cost push, so further price hike is inevitable,” according to the Japan Lumber Reports (JLR), a trade journal on the Japanese timber market published every two weeks.
The JLR is reproduced by the International Tropical Timber Organisation (ITTO) tropical timber market report.
Based on JLR figures, the present price of 3×6 JAS uncoated concrete forming panel is between US$580 and US$590 per cu m, which has risen from US$560 per cu m while that of concrete forming panel for coating is between US$680 and US$690 per cu m, up from US$660 per cu m.
The minimum wage in Sarawak and Sabah has been revised upwards to RM1,050 from RM920 previously or an increase of 14.1 percent while that in Peninsular Malaysia to RM1,050 from RM1,000.
According to JLR, the Sarawak government has raised the timber harvest tax to RM5 from 60 sen from Jan 1, 2019. The move, it noted, is to promote replanting and industrialisation of the state forest industry.
“South Sea (tropical) hardwood prices continue climbing after Malaysia raised minimum wages since Jan 1, 2019 and Sarawak government increased timber harvest tax.
“Present meranti regular log prices in Sarawak soared to nearly US$320 per cu m FOB (free on board), which is almost unacceptable level for users in Japan.
“However, log market prices in Japan are holding steady. Supply source of South Sea logs for Japan have shifted to PNG (Papua New Guinea), and PNG log prices are lower than Sarawak as a result of slowdown of Chinese log purchase by economic recession of Chinese economy.
“Trend of (Japanese) yen’s appreciation since early this year helps reduce log cost,” said JLR in its latest issue.
The JLR said based on 2019 demand projections from Japan Lumber Importers Association and four other business groups, the volume of imported logs for this year would decline.
“Log import would be below three million cubic metres, which is the main factor of dropping imported wood demand.
“Forecast of log import is 2,981,000 cu m, about 260,000 cu m less than 2018.The largest decrease of north American logs by 220,000 cu m to 2,350,000 cu m is the main factor of decline of log import.”
JLR said supply of South Sea hardwood logs would continue to decline because of Sabah’s export ban and decreasing supply from Sarawak.
“Lumber import from North America, South Sea and Russia would decrease some but from Europe, New Zealand and Chile would increase, so total would be the same as 2018 with 6,220,000 cu m.
“Russian log import would further decline by increase of log export duty by the Russian government.
“Lumber prices from North America in 2018 climbed sharply in the first half, then dropped in the second half but basic demand is unchanged in Japan.
“Cost of European lumber would continue high particularly of lamina so the manufacturers in Japan have been struggling.”
On imported plywood, JLR said the Japanese importers reduced purchase volume in second half-2018 due to climbing prices and lull demand in Japan.
“As future offer prices of imported plywood continue climbing by the suppliers, market in Japan shows some signs of tightening. Future arrival (of imported plywood) would continue (to be) low,” it added.
On new housing starts in Japan, which determines the demand for construction materials, like plywood and wood products, the ITTO’s latest report said 2018 housing starts fell over two percent year-on-year, marking the second consecutive year of decline.
Homes in the “for rent” sector saw a 5.5 percent drop, the first in seven months, and there was a slight drop in custom-built houses and other owner-occupied housing.
Regionally, starts for housing for sale rose in both Osaka and Aichi Prefectures but dropped almost 15 percent in Tokyo.
“Analysts continue to point out there are no signs of housing starts sky-rocketing in advance of the planned October consumption tax rise,” according to ITTO report (Feb 1-15) .
The consumption tax will be raised to 10 percent from current eight percent.
