Malaysia has not yet concluded a Voluntary Partnership Agreement (VPA) with the EU and negotiations between the two parties continue. It appears that the Peninsular Malaysia states (11 states and two federal territories) and the state of Sabah are likely to be the first to conclude a VPA and that the Malaysian state of Sarawak will make arrangements to participate in a VPA later. Because Malaysia has not yet concluded the VPA negotiations no FLEGT licensed timber is available for export from Malaysia to the EU.
The result of this is that, since the coming into force of the EUTR in March this year, Malaysian exporters have to provide evidence of the legality of exported wood products to EU importers so they can satisfy the due diligence requirements of the EUTR. To ensure an uninterrupted flow of wood product exports to the EU until a VPA is concluded the Malaysian government has launched its Malaysian Timber Legality Assurance System (MYTLAS) as a credible domestic system to verify the legality of Malaysian wood products.
Though based on the Timber Legality Assurance System (TLAS) developed under the framework of the FLEGT VPA negotiations with the the EU, MYTLAS and its implementation is a Malaysian initiative without linkage to the EU FLEGT VPA. Implementation of MYTLAS is subjected to a third party annual auditing to ensure its credibility and acceptance by EU operators in meeting the EUTR due diligence requirements.
The MYTLAS is operated by the Malaysia Timber Industry Board (MTIB) for exporters in Peninsular Malaysia while for exporters in Sabah the MYTLAS will be implemented by the Sabah Forestry Department. The Secretary General of the Ministry of Plantation Industries and Commodities, Nurmala Abdul Rahim, announced on 28 March, the formation of a MYTLAS Advisory Group comprising forestry experts and key MYLAS implementing agencies. Nurmala said “the advisory group will consider all aspects in the implementation of MYTLAS and measures to improve it taking into account feedback from stakeholders, market response and capacity building needs”.
Authority for timber licensing in Sabah to move from MTIB to Sabah Forestry Department
The industry in Sabah has been carefully observing the impending shift of licensing authority from the Malaysia Timber Industry Board to the Sabah Forestry Department. It is now expected that all aspects of licensing of the timber industry will be smoothly transferred to the Sabah Forestry Department by 1 May 2013. Analysts report that the timber industry in Sabah is working hard with federal and state authorities to get a timber tracking and management systems arranged so that the MYTLAS can function effectively in the state to ensure exporters can satisfy the needs of EU importers who must meet the requirements of the EUTR.
Poor weather conditions hamper harvesting in Sabah
Over the past weeks Sabah log FOB prices have increased slightly due to a scarcity of supply caused by unfavourable weather which is disrupting harvesting operations. The weaker yen has added around US$ 10 – 20 per cu.m to log FOB prices for the Japanese market. As trading conditions are subdued, it is reported that kapur regular quality logs for the Japanese market are priced at around US$ 130 per cu.m CIF.
Sarawak industry struggles to attract local workers despite increased minimum wage
The Sarawak Timber Association (STA) chairman, Wong Kie Yik, in addressing the association’s annual general meeting on 28 March, called on the government to help solve the labour problems faced by the timber industry. He said that despite the introduction of a higher minimum wage, STA members are still facing problems in finding workers. The STA believes the problem is mainly that working in the timber industry is not attractive to the domestic workforce especially as most enterprises are located in remote rural locations. As a result said Wong, the industry has relied mostly on foreign labour.
Log exporters encouraged by active buying from India and China
Sarawak timber exports in 2012 totalled RM 7.46 billion (approximately US$ 2.39 billion), a 5% increase on levels in 2011. Plywood made up 53% of total exports, logs just 24% and sawntimber 11%. Japan remained the state’s biggest buyer of wood products accounting for 38% of all exports in 2012. STA statistics show that log production in 2012 was 9,458,563 cu.m, down from 9,610,434 cu.m in 2011. In the first two months of 2013, Sarawak produced 1,185,371 cu.m of logs. Indicative export prices for Sarawak 2.7mm MR, BB/CC plywood are US$550 per cu.m FOB while for 9 mm and up plywood panels the price is US$430-450 per cu.m.
FOB export prices of Sarawak logs in March were as follows:
meranti SQ US$ 250 – 265 per cu.m
kapur SQ US$ 340 – 360 per cu.m
keruing SQ US$ 300 – 315 per cu.m
selangan batu regular US$ 500 – 540 per cu.m
Log prices in Sabah and Sarawak are steadily moving higher as the availability of logs for export in the two states has declined because of poor weather conditions and because of active buying by local plywood plants and sawmills. Buyers from India and China are chasing Sabah and Sarawak logs as the availability of logs from Papua New Guinea has reportedly fallen.