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Malaysia:Neutral outlook for timber in 2015, eye on log supply

KUCHING: RHB Research Institute Sdn Bhd (RHB Research) maintains its neutral outlook on the timber sector ahead, as it warns investors to keep an eye out for two key moves in Sarawak’s timber sector entering into 2015 which could impact log production and supply. The first, it said, is the implementation of the Sarawak government’s new timber licensing policy announced in August, where the government is extending the tenure of forest concession licenses to up to 60 years from five to 15 years currently. This is provided that the license holders achieve the Forest Management Certification within three years of issuance. “This certification can come from the Malaysian Timber Certification Scheme (MTCS) as well as from internationally-recognised bodies like the Forest Stewardship Council (FSC) in New Zealand or Programme for the Endorsement of Forest Certification schemes (PEFC),” it observed in its Market Strategy 2015 report on Monday. “While we do not expect this to change the logging concessionaires’ log harvesting volumes or quotas, this could incur higher costs, coming from the certification process. “In the longer term, if smaller concession holders do not comply with the certification requirement, this could result in some concessions being re-allocated.” RHB Research also highlighted the recent crackdown by new Chief Minister Datuk Patinggi Tan Sri Adenan Satem on illegal logging activities and the freezing of new logging licences as the second move to monitor. “This could result in fewer logs coming out of the state from illegal sources, which could result in reduced log supply in 2015,” it explained, adding that it was difficult to quantify the quantum of illegal logging at this juncture. Nevertheless, RHB Research noted that Sarawak’s log production was still on the rise, although the rate of growth has moderated slightly to four per cent year on year (y-o-y) in the first seven months of 2014 – down from 6.9 percent seen in the first six months. “We highlight that not all the companies we cover recorded increases in log volumes during the same period. “Of the three companies we cover, two companies recorded increases in log production in the same period, namely Ta Ann Holdings Bhd (Ta Ann) which was up 26 per cent y-o-y, and WTK Holdings Bhd (up 13.4 per cent y-o-y), while Jaya Tiasa Holdings Bhd recorded a 5.7 per cent y-o-y decline. “We believe this is due to the fact that in previous years, Jaya Tiasa has always been logging at close to its concession quota of 1.1 million cubic metres of logs per annum, whereas Ta Ann and WTK have ample room to increase harvesting, based on their quotas of 590,000 cubic metres and 600,000 cubic metres of logs respectively per annum.” The research house said increasing log volume was still being absorbed by India, driven by Myanmar’s log export ban and continued infrastructure spending in the country. “Log exports to India from Sarawak remains at 60 to 65 per cent of total log exports in 9M14, although meranti log prices have remained flattish since August this year at about US$290 per cubic meter. “Although this is higher than our projected price increase of six to eight percent per annum for CY14 and four to six percent for CY15-16, we prefer to remain conservative for now.” Source:Borneo Post Posted and edited by Hanbao News Department Contact: import-export@hanbaogroup.com

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