KUCHING: The weak international market demand and slowdown in the domestic construction industry have continued to impact the production of Malaysian timber companies.
Global Timber Index (GTI)-Malaysia enterprises reported facing the dual challenges of rising raw materials prices and reduced order quantity.
In May, GTI-Malaysia index registered 28 per cent, a decrease of 2.5 percentage points from the previous month, was below the critical value (50) for seven consecutive months, indicating that the business prosperity of the superior timber enterprises represented by GTI-Malaysia index shrank from last month and the contraction was expanded.
As for the GTI-Malaysia sub-index, in May 2023, only the inventory index of finished products equal to the critical value while the remaining 10 sub-sectors such as harvesting, production, new orders, export orders, existing orders, purchase quantity, purchase price, inventory of main raw materials, employees and delivery time, were all below the critical value.
The harvesting index registered 41.7 per cent in May, up 1.7 percentage points from April, was below the critical value for seven consecutive months, indicating that the harvesting volume of the superior timber enterprises represented by GTI-Malaysia was less than that of last month.
The production index recorded 25 per cent, down 15 percentage points month-on-month, indicating the production volume of the superior timber enterprises was less than that of the previous month.
The new orders index registered 25 per cent, up five percentage points from the previous months, indicating that the number of new orders of the superior timber enterprises was less than that of the previous month.
The export orders and existing orders indexes both registered the same at 20 per cent month-on-month while the inventory index of finished products registered 50 per cent, a decrease of five percentage point from the previous month.
Month-on-month, both the purchase quantity index and purchase price index registered 44.4 per cent but the inventory index of main raw materials registered 27.8 per cent, an increase of 5.6 percentage points from the previous month.
The production and management employee index registered 35 per cent, same as last month while the delivery time index recorded 30 per cent, down five percentage points from the previous month.
GTI-Malaysia listed out several main challenges reported by timber enterprises, and these include insufficient order quantity, labour shortage due to decreased market demand, slow export shipments due to product surplus in importing countries, decreased export orders and insufficient and expensive raw materials.
Others are declining price of plywood, sluggish demand for plywood due to slowdown in the construction industry as well as rising production costs.
GTI-Malaysia enterprises have suggested several measures to address the various challenges.
These suggestions are expand markets and seek labour force, strictly control production costs, establish quotas for woodchip exports as well as government assistance in controlling production and logistics costs.
In the forestry sector, GTI-Malaysia reported that the Sarawak Timber Association has called for maximising the use of timber from planted forests to produce high-value added products, such as wood-based panel and furniture.
The Sarawak government was reported to be taking proactive measures to meet the needs of the timber industry by ensuring a sustainable and renewable supply of raw materials.
To achieve this goal, the government will collaborate with the private sector for forest plantation development.
The GTI Index in May 2023 shows that the GTI indexes of the seven pilot countries (Indonesia, Malaysia, Gabon, ROC, Brazil, Mexico and China) were all below the critical value as the contraction in international market demand continued to affect timber enterprises in the timber producing and processing countries.
“Gabon, Brazil and Malaysia recorded GTI index of 33.8 per cent, 32.9 per cent and 28 per cent respectively with a continuous contraction trend for 7 consecutive months, meaning significant pressure on survival and development of timber enterprises,” said the monthly GTI report.
