Malaysia: Inflation is in check and 2013 prospects appear good

ITTO's Tropical Timber Market Report
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The Malaysian economy grew by 5.6% in 2012 compared to 5.1% in 2011 according to a recent report from the Central Bank. Growth in the last quarter of 2012 was 6.4% and there was an increase of 1.3% in the consumer price index.

Private sector investments grew by 20.2% while public investment went up by 11.1% in the last quarter. The Central Bank report said that investments were robust and were the main drivers of growth in the last quarter.

Growth in the construction sector continued to be strong, pushed up by civil engineering and building in the residential sector. A sustained growth in the domestic economy is expected to support positive growth in 2013, despite expected weak economic growth in the advanced economies.

Domestic demand has been stimulated by some expansionary government policies which are slowly being wound down. Malaysia was one of the few S. E. Asian economies to achieve a substantial expansion of exports during the final quarter of 2012.

Despite low log stocks prices remain flat
The timber industry in Malaysia is slowly getting back to business after the long Chinese New Year holiday but trading remains quiet at the moment. Log stocks are reported low at present, the combined result of the rainy season and the long industry shut-down for the New Year festival.

Some plywood factories are complaining that the flow of logs is inadequate for production and this is resulting in some upward pressure on log prices. Analysts report that these pressures will grow if market demand picks up however, at the moment trade is too thin for there to be any major shift in prices.

The Chinese market is still quiet as the industries there slowly get back into production after the holiday period while Indian buyers are only in the market to meet immediate demand.

Markets in Asian ‘growth engines’ waiting for some good news from EU and US
Analysts anticipated an improvement in timber prices as log stocks fell due to the disruption to logging activities but there has been little change.

Lingui Development Bhd, a major timber company in Malaysia was quoted by the Malaysian Star newspaper saying “demand for plywood and veneer from Japan in the fourth quarter of last year was generally lackluster, partly due to the weakened yen”.

Timber exporters such as Lingui have been severely impacted by the considerable slowdown in demand from Asia’s ‘growth engines’, China and India. All eyes are on Europe and USA to deliver a prosperous year of the snake.

Log Export Prices (FOBSarawak)

Meranti SQ US$ 255 – 260
Kapur SQ US$ 310 – 340
Keruing SQ US$ 250 – 270
Selangan Batu regular US$ 310 – 350

Export Plywood Prices

Malaysia ply MR BB/CC, FOB US$ per m³
9mm & up
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