News that demands for timber products outstrips supply in the United States (US) and United Kingdom (UK)) should be music to the ears of Malaysian timber producers. The sanctions on Russian timber products to the US have undoubtedly led to American importers looking for alternative sources of material, especially for plywood.
Moreover, the on-going trade dispute between the US and China has left Malaysia and Indonesia as the only timber source options for the world’s largest economy. As it is, Malaysian plywood mills are unable to meet the supply volume demanded by US importers.
The current market sentiments for Malaysian timber in the US is bright especially for Meranti and Keruing. The demand for Meranti sawn timber has increased by 9% year-on-year while Keruing has increased by 467% year- on-year. However, shipments from Malaysia are slow given shortage of logs from natural forest have left Malaysian sawmills struggling to fulfil the increasing demands and orders.
Another challenge that exporters have to cope with is heavy port congestion that ranges from lack of containers to insufficient vessel space and other logistical constraints.
Nevertheless, transshipments of timber products have been identified as a potential medium-term solution. In this regard, the US-based International Wood Products Association (IWPA) is eager to speak to Malaysian timber industry leaders on the ways and means to address this issue.
As this will entail measures of protecting Malaysia from being targeted by the US domestic timber product association and the US authority on the suspicion of trade circumvention, collaboration is being drawn up between the US compliance officer and Malaysian authorities such as the Malaysian Timber Industry Board (MTIB) and Customs.
Keen to cooperate with UK
Like in the case of the US, Malaysia is prepared to work closely with the UK to address the country’s shortage of timber and timber products by sourcing and value-adding from third countries, especially PEFC (Programme for the Endorsement of Forest Certification) – certified timber products. For the record, the UK is the biggest supporter of the US sanctions on Russian timbers. Such measures have severely affected the timber market for the UK and the European Union (EU).
As the Malaysian timber industry places strong concerns on the ENVI (Committee on the Environment, Public Health and Food Safety) Deforestation proposal, Malaysia is keen to know the UK’s position on this proposal as well as working out a consensus on the definitions of deforestation and forest degradation.
Despite facing significant disruptions to the market, the UK import volume of timber products in 2021 rose by 15% – the largest volume of imports seen since 2008. As of Jan 1, changes in the UK Customs regulations came into effect as the country is on the verge of leaving the European Union’s (EU) Customs Union and Single Market framework.
As such, the timber industry stands to benefit from many duty-free products and can often avoid the need to claim preferential rates of duty. While Malaysia benefits from the UK customs regulation update, it also hopes that the UK Government will further streamline the procedures and document handling to ease the current logistical nightmare situation.
How Malaysia fared in 2021?
As a mature timber supplier, the Malaysian timber industry continued to perform well despite the COVID-19 pandemic and its associated economic fall-out with exports posting growth of 3.1% to RM22.7 billion in 2021 from RM22.02 billion in the previous year. Plywood was ranked top in terms of export value which together with wooden furniture, sawn timber and builder joineries as well as carpentry contributed more than half of the total exports, according to the Malaysian Timber Council (MTC).
Recall that demand for Malaysian timber-based products especially furniture grew in early 2020 as many people around the world began working from home, leading to a rise in home construction, repairs and re-modelling. 2021 further saw a surge in demand for Malaysian plywood in the US and Japan whereby in the latter’s case, the liquidation of a top plywood manufacturer led to an increase in demand.
However, it has to be borne in mind that the Malaysian timber industry is not entirely out of the woods as there were still some laggards in terms of rising sea freight charges, availability of containers, manpower shortages, and lack of raw materials.
On its part, MTC has introduced numerous programmes since 2020 to help the timber industry overcome the more pressing challenges by providing incentives
which also include catering to technological advancements that help increase the use of resources efficiently in all aspects apart from defraying sea freight charges.
Above all else, the council has also come out with seven Must-Wins initiatives for 2022 which focus on reviving businesses with several new programmes for oil palm trunk products, product design collaboration with the Forest Research Institute Malaysia (FRIM), and the establishment of Environmental, Social and Governance (ESG) guidelines for the timber industry.
