Plywood producers in danger: Indonesian Industry body

The Jakarta Post 21 Nov 07

With illegal logging of ever-increasing concern, the country's plywood industry has suffered an acute shortage of raw materials, threatening to close almost half of the companies involved in the business.

Chairwoman of Forest Industry Revitalization Body Soewarni said here Tuesday that almost a half of the 100 or so companies engaged in the production of plywood and other wood products had been forced to close down due to lack of raw materials.

The shortage, for which she said government efforts to curb illegal logging was responsible, began in 2005.

Wood taken from licensed forest areas was often seized. "As a result, most plywood companies close down their businesses, lay off their workers or reduce production capacity. Of around 100 companies in the plywood industry, only between 40 and 50 companies can survive," Soewarni said on the sidelines of Asean Wood Furnitechno 2007.

She said the decline of the industry was shown by the continued drop in the country's plywood exports. According to her, plywood exports in the first nine months of this year reached only about US$1 billion, as compared to $1.6 billion in 2006.

She added that woodworking exports as of September 2007 were only about $940 million, compared to $1.3 billion in 2006.

Director General for Agro and Chemical industries at the Industry Ministry Benny Wahyudi also acknowledged that the lack of raw materials posed a major blow to the industry.

He said that the volume of semi-finished wood (mostly plywood) exports fell sharply to 2.08 million tons in 2006 from as high as 4 million tons in 2002. The highest drop was suffered by plywood exports, which plunged to 1.98 million tons in 2006, from 3.58 million tons in 2002.

He said that the decline in timber production had caused the industry to suffer a raw material deficit of about 20 million cubic meters a year.

According to him, the annual demand had reached about 62 million cubic meters while the supply is only about 42 million cubic meters.

Soewarni said the soaring of international oil prices and the high-cost economy caused by red tape and legal uncertainty also posed a threat to the industry.

"With international oil prices reaching $100 per barrel, the industry is facing hard times because production costs could rise by between 4 and 10 percent."

Soewarni estimated that the limited supply of raw materials would push plywood export prices up to $480 per cubic meter from $460 and woodworking export prices to as high as $700 per cubic meter, from $500 per cubic meter now.

With the increase in production costs, it is unlikely that producers will be able to enjoy the price increase, she said.