KUCHING: Log supply in Malaysia is dropping rapidly as the country is in the rainy season again, affecting timber harvesting activities.

The decline in supply is pushing up log prices, according to the Japan Lumber Reports (JLR).

“After log prices dropped in last summer, log suppliers have begun reducing harvest since last August, so the supply decreased much faster than normal year.

“Log inventories of local plywood mills are decreasing rapidly, so local log prices are also climbing,” said the trade journal, which is published every two weeks, in its Nov 15-30 2019 issue. The JLR is reproduced by the International Tropical Timber Organisation (Itto) Tropical Timber Market Report.

The JLR said the supply and demand of South Sea (tropical) logs in Japan are balanced.

“There was no arrival (of shipment) in September both from Malaysia and PNG (Papua New Guinea) but plywood manufacturers carry about two to three months inventories.

“Malaysia is in rainy season, so the log supply is dropping rapidly,” it added.

 

Japan importers turned to PNG to source for tropical logs after Sabah banned timber exports in May 2018 to make up for the shortfalls.

Japan is one of the key export markets for Sarawak logs. In the first 10 months of 2019, Japan purchased some 32,713 cubic metres (cbm) of logs worth about RM28.12 million (free on board) from Sarawak.

On Japan’s export of cedar logs for China from Kyushu ports, the JLR said the export prices have dropped to about 8,000 yen per cbm FOB port or lower for the last six months from about 9,500 yen per cbm.

“Radiata pine log prices from New Zealand to China have been gradually climbing and ocean freight is also increasing but Chinese buyers demand 12,000 yen per cbm C&F Shanghai for Kyushu cedar logs.

“The Chinese log market bottomed in September but is improving and the buyers plan to build up the inventories for next year’s (Chinese) New Year in February. They will keep buying if present price level continues,” it added.

In 2018, total logs exported from Kyushu ports were about 950,000 cbm, which is 25 percent more than 2017, out of which logs for China were about 800,000 cbm.

“For the Japanese logs exporters, the concern is log purchase competition with biomass power generation plants. If the export log prices drop too much, logs would go to biomass business.

“Present prices for biomass are holding at 7,000 yen per cbm FOB chip plant. In short, minimum export log prices are 7,500 yen per cbm FOB port, and if there are lower than this, logs would go to biomass plants,” explained JLR.