APP Timber Web Log 

The Indonesian labour unions demand that the provincial minimum wage of Jakarta is increased to IDR 3.7 million (USD330) per month in 2014 and they are VERY serious about it threatening with demonstrations later this week and possible strikes next month. The Indonesian manufacturers around Jakarta are still trying to recover from the previous 44% increase to IDR 2.2 million (USD220) earlier this year. The same applies to other industrial areas across Indonesia but there the increase was limited to about 20%. Based on my personal discussions with our customers they are trying to limit the impact of this year’s salary increase by reducing the workforce, more automation, less over-time and pushing for a higher output per worker. Of course it is true that Indonesia has among the lowest minimum wages in Asia but the productivity is also low (as is the cost of living). So rather than just fighting for higher wages the unions should also ensure that the workforce improves and provides much higher output. Demanding another 50% increase is of course completely unreasonable and will result to lots of industrial unrest.


We just posted an article on our website warning our customers about the USA Proposed Rules on Formaldehyde which calls for a “third-party certification framework” for the formaldehyde emissions standards for composite panels AND (very important) the inclusion of emissions of laminated veneers onto composite panels. The current CARB does not require the third-party certification and excludes laminated veneers onto panels.
These two changes will cause havoc for Asian manufacturers of for example engineered furniture, engineered doors and/or engineered flooring yet none of our customers seems aware of these on-going discussions in the USA. The logistics alone to provide this third-party certification Asia-wide and the potential costs would ensure that our wood products will become more expensive.
As usual I am surprised by most of our Asian customers’ lack of information on this matter and it seems they all put their head in the sand and wait till it is too late!
We need to take ACTION now and let the USA know that the new proposed EPA is not workable for our industry. I strongly suggest you learn more about this (for example visit and and contact your local trade organisations and/or Governmental department(s) to decide on proper action.

Radiata pine 1

Radiata pine 1

I just returned from a two week trip visiting taeda/elliottii pine sawmills in Brazil and radiata pine sawmills Chile and was a pleasantly surprised with the positive feedback about South America’s current softwood export business. All of the mills I visited recorded very good sales to Central America, Middle and Far East and they are very optimistic about the future. Some of the mills are investing in either new sawmills or upgrading their existing equipment. A lack of kiln capacity used to be the norm in South America but they are catching up fast with the installation of good drying plants suitable for appearance timber. The general quality is improving as many of the mills are adapting their grading to export standards.

This is in sharp contracts to the situation in New Zealand where many of the suppliers are struggling to maintain the current exports volumes and most of them are struggling to survive. It is pretty obvious that the future supply of taeda/elliottie and radiata pine to Asia is going to depend heavily on South America and less on New Zealand radiata pine. My only worry is that the forest ownership in Chile is almost 100% owned by three large companies (Arauco, CMPC and Masisa) and as such they basically “own” the whole Chilean timber industry and the independent mills rely on the log supply from these giants.

Taeda/elliottii pine 1

Taeda/elliottii pine 1


Taeda/elliottii pine 2


The sentiment in Europe about the crisis is pretty optimistic and most Europeans I speak to believe “the worst is over” yet I dare to disagree.

Many of our overseas suppliers ask us regularly about our business is in Asia. The first few months were pretty good and certainly better than the last few months in 2012. But I am worried for the 2nd half this year.

We sell our imported timber to manufacturers of a wide range of furniture, doors, flooring and other products and our sales teams meet these customers on weekly basis so, I guess, we do have a pretty good idea about their current export orders. Furniture exports to the USA are steadily improving but are declining to Europe. Most furniture manufacturers complain that the orders taken from European buyers during the various exhibitions earlier this year were disappointing. Exports of doors and flooring (both mainly engineered) to Europe are the worst hit and some Asian manufacturers have taken the unusual step to reduce or even cancel program orders with us.

Another factor is China which is slowing down much faster than expected and this will seriously affect imports from Europe and South East Asia. For example Germany in the past depended very much on technology export to China which will reduce fast.

Warehousing (9)Based on what we encounter in Asia I believe the crisis is far from over but might have hit rock-bottom but no positive reversal is to be expected soon. Unfortunately it might take another one to two years for Europe to start recovering and imports of Asian made timber products increase a lot.

A bit of shocking news this week; “FSC has dissociated themselves with the Danzer Group after accusations that the Swiss company’s former subsidiary engaged in human-rights abuse in the Democratic Republic of Congo”. This dates back to May 2011 when a logging company “Siforco, previously owned by Danzer, was involved in “unacceptable activities” assisting the local police and military to attack a forest village.

In the meantime the CEO of Danzer has confirmed the above and said that “Danzer supports the measure of the FSC to avert damage to the brand FSC and its reputation”. However Danzer also reaffirms that they had engaged the services of SGS and SGS’s audit concluded that “Siforco had acted properly under the given circumstances”.

All in all a bit contradicting information and for sure there will be more press releases issued in the future. My question is if it justifies to cancel the FSC certification (and membership) of the whole Danzer Group? Personally I do not think so since this concerns only one operation and has little to do with the other operations. The result is that less FSC certified timber will be available in the market which does not benefit the manufacturers using FSC timber nor the end-users. The supply of FSC and/or PEFC certified timber from Africa is already limited so it would certainly be helpful if those operations not involved in the above abuse can maintain their certification.

Life is not a straight line.

Life is not a straight line.

I just finished writing an article for the Indonesian trade magazine “woodmag” about an European company called “Bolefloor” which manufactures solid and engineered flooring produced in the same shape as the original unedged timber boards. This product is very creative and completely different from the traditional flooring available in the market. The other unique service is that this company is capable designing each floor based on the actual space where the floor has to be installed. So the customer can submit his floor plan and they will design the floor according to the layout of the room. Each flooring board will come with a number for easy installation. For sure such floor will not be cheap but it is truly unique and rest assure that customers are willing to pay the price for such product.

This type of product and service innovation is seldom seen here in Asia. Sadly to say most of our Asian customers mostly to to “innovate” cutting production costs and fail to innovate their products and, equally important, their customer service. Have a look for yourself at, maybe it encourages you to be bold and innovate too; “Life is not a straight line”.

I was last month at the IWPA (International Wood Products Association) in Vancouver, Canada and one of the hotly debated topics was the above “anti-dumping” measure which, at the time of the meeting, was not yet decided. But now the cat is out the back and the above is in place sine end April.

So what actually happened?

A small group of local US softwood plywood manufacturers initiated the whole process filing a case of “unfair” competition claiming the cheaper Chinese imported hardwood plywood was damaging the US plywood manufacturers. Of course one wonders why softwood plywood manufacturers are in competition with hardwood plywood since each of the products has its own specific end uses. And , more important, is that the US plywood manufacturers are in no position to produce enough plywood for the local market.
But it gets worse; the US government found that “all individually investigated Chinese plywood exporters did not engage in dumping or unfair pricing” but nevertheless imposed a whopping average import duty of 22.14%. Do not ask me how they came to this figure, it was explained to us at the IWPA but regretfully I, with only an university degree, did not understand the US government’s calculation and neither did most others.

A couple of years ago many governments were trying increase trade by engaging in all kind of trade agreements across the world but guess that in economic hard times as today many of them are protecting themselves even when it concerns proven fair business practice from Chinese suppliers.

Shenzhen has raised the minimum monthly salary from RMB1500 to RM1600 (USD255) per March 1 this year. And Guangdong Province recently announced to raise the minimum wage level with 20% to RMB1550 per May 1. These increases are very much in line with other provinces and cities that also have increased the minimum wage levels from January 1, 2013 onwards.

China has announced that they intend to increase the minimum salaries with at least 13% per annum before 2015 including the more inland provinces. It is obvious that the cost of living in China has risen drastically over the last few years and these salary increases are common sense but one wonders what this will do to the Chinese manufacturing output. Many Chinese manufacturers are complaining about the shortage of workers and they believe that the nationwide minimum wage increase will only worsen this situation as migrant workers can earn decent salaries in their home provinces.

I was last week at the Interzum in Guangzhou and noticed a few things;

1. The general visitors attendance seemed less to me as previous years
2. Many of the European machine manufacturers showed highly automated production lines
3. The number of overseas exhibitors offering timber and timber products was very small

One could conclude that the Chinese timber industry is slowing down (we do notice this in our business), manufacturers must upgrade and automate their production lines and lastly the interest of overseas suppliers to sell to China seems to be less.
We certainly do encounter a shortage in the supply of certain American hardwoods and a few US suppliers told me at the show that their domestic sales is booming for example the sales of red oak to local flooring plants.

Might this be the end of the enormous growth of the timber manufacturing industry in China and production shift closer “home” to those locations with natural resources?

I was informed today that Southland Veneers Ltd. (in short SVL) will close their operations by the end of the month. The factory produces mainly plywood face and core rotary veneers from radiata pine. It is owned by a good Danish friend, a true veteran in this business, who has been working very hard the last 12 years to make the operation profitable but regretfully it was not for many years.

My friend called me today and explained that the current log supply is very problematic as the good quality logs are being exported and all what is left are either low grade logs or higher grade sold at extreme high prices. In the past most of the surrounding forests were controlled by “local” people living at South Island but the last few years many newcomers (often none Southerners) have been buying up forests to exploit log exports to China and India.

Another problem is the unfavourable exchange rate since the New Zealand dollar has strengthened over the last few years (for reasons unknown to many of us). But, as my friend told me, the exchange rate was more or less a “fait compli” and they could live with it as long as they could produce quality products which is not the case anymore.
So at the end THE main reason is the diminishing availability of good quality logs sold at reasonable prices. This also affects other sawmills based all over New Zealand. For many years I have been advocating that the New Zealand government should impose an export log ban or at least impose a high export levy on logs to encourage processing in New Zealand rather than selling unprocessed resources to, for example, the Chinese who than in return will compete with more expensive New Zealand made products. It seems that the government is totally not interested in supporting their own industry and does not care mills close.

The Kiwis are proud of their All Blacks rugby team and support their nation’s sports to the extreme; a pit they do not do the same for one of their prime industries. Rest assure that regretfully the closure of SVL will not be the last one.

I just received the Jan/Feb issue of “Asian Timber” which used to be one of the leading SE Asian timber magazines and to my big surprise the editor has written an short introduction article with the heading “Palm Wood, A New Timber Species?”. The article relates to a Malaysian company who has succeeded in developing palm trunk for the commercial production of furniture. Of course I fully support the good use of any of nature’s residues but do object to misleading the public with wrong product labeling.

Let’s be very clear about this; palm is a grass as is bamboo and both should not be called “wood” or “timber”. Wood or timber is the hard fibre part in the stems or roots of trees and plants which grow by dividing cells called the “cambium” producing new “xylem” and “phloem” both protected by bark. Palms do not have cambium and do not produce neither xylem nor phloem and do not have bark.

A few years ago some clever Malaysian thought to promote rubberwood as “Malaysian oak” but that lasted only a few months and even the Malaysian governmental organisations had to withdraw their “oak” claim as it was 100% misleading. I trust the same will happen with the “grass” species.

I do hope that the editor of this magazine lives up to the publication’s name……