September 7, 2007

Double Impact

A simple maths for you to consider.

First Impact

Years, from 1997-2004, when the RM was pegged to USD, 1 USD is equivalent to RM3.80.

So for years, a lot of people enjoying this stability for doing business without having to be scared of the currency price hikes and so on.

People used to export things at USD100 per tonne of which they made RM30 profit from each tonne. If they export 1000 tonne, that means they're making RM30,000 profit.

As for now, 1 USD has dropped to RM3.40, they're still selling at USD100 per tonne, of which they're now making -RM10.

That's a loss.

So they really cannot sell timbers anymore. They really cannot sell because the disability of Malaysian not-so-good-of-quality timbers to compete with the international cheap prices and better quality timbers. There are even sawmillers from Johor who bought timbers directly from the US.

Why not? The US are selling in the same US dollar price. The fuel price is also in US dollar so what do they care? They were all spending in US dollar. So in fact, they are making money no matter what.

So, the wood price has dropped. To a level that is hard to survive.

Second Impact

Kelantan, Pahang and Terengganu is very well-known to be producing a lot of logs, big logs and of high quality compared to Johor. All this while, whenever Johor has been asking to be buying logs from them, Johor people can only get the small-sized logs.

Even though Johor is very well known as the State with the most number of wood industries such as furnitures and sawmilling.

And because they also have been selling to the Thailand, as they are paying better money as they're exporting furnitures, paid in USD.

The election is coming, and as state governments needs money, they have released a lot of logging areas and the permits, of which means that a lot of logs are coming.

Unfortunately, as the US dollar drops like hell, East Coast Timbers (ECT from Kelantan, Terengganu and Pahang) who were being paid in RM has been in some ways become expensive to the Thailand, and furthermore, the cost has been so high in Baht that selling US dollar is no longer profitable.

Hence, they refused to buy the ECTs.

What happened? They are desperately dumping all the timbers to Johor now as Johor's wood industry is still surviving. That made the timber prices to drop a lot more as they supplies are more than the demand.

So, the wood price has dropped. To a level that the buyer can just ask for the best price anytime.


It's a double impact. Price of timber has gone down really bad. This situation lead by these situations:-

1. The US is lowering down their USD value so that they can sell their things. (Another economic attack?)
2. The election is coming. Hehehe..

So who are you going to vote?

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