Myanmar: Buyers feel pressure to quickly ship logs

ITTO's Tropical Timber Market Report
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Analysts report that the firm demand conditions remain. Trading activity picked up in early May after the end of the Myanmar New Year holidays and exporters focused on arranging vessels to ship wood logs from the auctions held before the holidays.

Financially sound and regular log buyers have long term contracts with shipping companies but other buyers prefer the ‘spot’ shipping market in the hope of securing competitive freight rates. Demand for teak logs is particularly firm and there are regular export shipments being made as buyers build up stocks. In contrast to trends in past years even the non-durable hardwoods are being shipped out immediately, driven by the prospect of the log export ban.

With only eleven months before Myanmar is expected to introduce a log export ban exporters, especially those with large stocks, are under a huge pressure to ship logs before the ban is introduced.

Maintaining shipping schedules a challenge
Export data for the financial year 2012-13 show that about 1.2 million tons of timber was shipped. The present unshipped stock in Yangon is reportedly above 1 million ton. Shippers in Myanmar face many logistical constraints. On top of the usual delays to shipments caused by the seasonal weather pattern, inadequate trucking capacity, port congestion and time restrictions on logging truck movement on roads leading to some of the wharves make scheduling shipments difficult.

Escalation of illegal logging reported in domestic press
Over the past week the most talked about newspaper headline in forestry circles was from the Kumudra Journal of the 7th May which asked “How much have we sacrificed the forests in the Shan and Kachin states to meet the demands of the Chinese timber industry?” .

The article reports interviews with people living in the Shan and Kachin states as well as Myanmar Timber Merchants Association (MTMA) representatives and comes to the conclusion that the annual illegal trade in timber is about 100,000 tons.

Barber Cho, Secretary of the MTMA has said illegally harvested timber leaving the country via overland routes could be worth over US$200 million annually and that the extent of the problem has been made worse by an escalation of the conflict between government forces and ethnic groups in the Shan and Kachin states.

Cho added that illegally harvested logs, when exported from Myanmar, are being ‘legalised’ through the payment of local taxes where the logs will be processed. Analysts who have visited the area say that, in some cases, mountain sides have been almost totally denuded by illegal operators.

Sanctions eased but industry still facing hurdles
It is the view of the MTMA that, while the EU has lifted sanctions on trade with Myanmar, certification and timber legality issues remain major barriers to trade for Myanmar timber exporters. The US has lifted the ban on export of forest products from Myanmar but the US “Myanmar Freedom Act” has been extended which makes financial transactions difficult and costly.

Analysts say the ministry of forestry is struggling to address the situation and that there is need for a coordinated action plan for both the state and the private forestry and wood working sectors. The following prices were recorded during the teak auctions on 26th and 29th April 2013.

Grade Quantity (Tons) € per ton
4th Quality 10 7474
Sawing Grade-1 21 5808
Sawing Grade-2 36 5555
Sawing Grade-4 234 3439
Sawing Grade-5 135 2375
Sawing Grade-6 103 2102
Sawing Grade-7 64 1780

Hoppus ton=1.8m³; All grades, except SG-3/5/6, are length 8' x girth 5' &up. SG-3/4/6 are girth 4' &up. SG-3 grade is higher than SG-4 but with lower girth and price.
Prices differ due to quality or girth at the time of the transaction.

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