The curtailment of administrative restrictions by developed countries and the higher quality of Indonesian plywood against its Chinese counterpart, are contributing to a rise in Indonesian plywood exports.
Asia is a key region in terms of the global plywood market, where China plays a decisive role, as on the remainder of the world stage. The slowdown in the Chinese economy in 2014 resulted in a contraction of domestic demand, thereby pushing Chinese manufacturers to increase exports. In 2015, however, the PRC was unable to avoid the first decline in plywood exports in X years; total exports amounted to X million cubic metres in real terms (as estimated by IndexBox Marketing). The introduction of restrictive tax duties by the major consumer countries, the USA and the EU in particular, was one reason to account for this decline.
It should be mentioned that, in terms of the global market, Chinese manufacturers occupy the low-quality niche, with low-grade types of plywood: resins with high formaldehyde emissions are used in the manufacturing process. The quality of Chinese plywood products can be erratic, but their low cost means that they are in high demand. Cost-effective labour and cheap raw materials make it feasible for the Chinese manufacturers to maintain low prices. At the same time, the growing deficit in raw materials is making manufacturers increasingly dependant on raw materials imports; this, combined with rising labour costs is contributing to higher end product prices. As a result, Chinese plywood is starting to lose its competitive edge over other manufacturers.
Malaysia, specializing in the manufacture of tropical wood-based products for export, is one of China's main competitors. In 2015, Malaysia appeared to be the most profitable in terms of price, when compared with all the other Asian country-suppliers of plywood, including China, as Chinese products were higher in terms of cost, but lower in quality. This, however, did not prevent a drop in Malaysian exports last year; over the past several consecutive years, Malaysian exports have been contracting. The reduced procurement of tropical plywood in Europe, where consumers are starting to increasingly opt for other types of hardwood plywood, can account for this. The X% decline in exports, however, has not resulted in reduced levels of output in Malaysia: domestic demand growth has offset the partial loss from foreign markets.
Indonesia is another of China's competitors on the global plywood market; last year, Indonesian exports increased by X%, to X million cubic metres (as estimated by IndexBox). Japan is one of the main consumers of Indonesian plywood but, unlike South Korea and the USA, which last year increased imports by X% and X% respectively, Japan has slashed procurement by X%, due to the falling domestic demand for plywood.
In 2016-2017, Indonesia is most likely set to increase plywood exports: not because it manufactures higher quality plywood products when compared with Chinese output, but because the administrative restrictions by developed countries on Indonesian imports are due to be relaxed. For example, last summer, the European Union recognised the right of the Indonesian government to issue local manufacturers with licences for EU timber exports; these will be effective as of November X. Increased exports will assist in Jakarta's official planned alleviation of corporate taxes by X percentage points, to X%. As a result, the rate of growth of Indonesian plywood output is projected to increase in the medium term.
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