Tropical timber producers are facing a crisis due to measures taken to contain the spread of COVID-19. Some governments have instituted total lockdowns or restricted movement while others have less stringent approaches. A survey undertaken by ITTO Market Information Service (MIS) correspondents with relevant stakeholders shows that the virus and responses to it are having devastating impacts in the tropical timber sector.
Impact of pandemic—early results of a survey
ITTO MIS correspondents in Brazil, Ghana, India, Indonesia, Malaysia, Myanmar and Viet Nam writing for the bimonthly Tropical Timber Market Report were asked in April to use their networks to seek answers to questions on the impacts of the pandemic. Highlights from the responses received are provided below, with the full results available in the ITTO MIS Tropical Timber Market Report 24(7) published on 16 April 2020. The same questions have been distributed to members of the ITTO Trade Advisory Group (TAG), and their responses will be compiled and made available on the ITTO website and in the Tropical Timber Market Report in May.
There is no clear picture on how the pandemic is affecting timber companies in Africa. Almost all countries are reporting cases of COVID-19 and, as the number of infections grows, more countries are finding that the virus has spread beyond the main cities.
Of the 47 African member countries of the World Health Organization, almost 60% have reported cases in multiple locations, compared with 21% at the beginning of April.
Considerable variation in responses to the pandemic in African countries makes analysis difficult. What is certain is that jobs are being lost, and African economies will see a drastic drop in export earnings from the timber sector in coming months.
Correspondents report that sawmills in Cameroon are unable to operate. There is a lockdown in the Democratic Republic of the Congo, although some timber companies there have authority to continue operations. A similar situation prevails in the Congo, where some companies are still in production. Correspondents report that timber shipments are continuing from Equatorial Guinea, despite a “national state of alarm” declared there.
Mills in Ghana with available raw materials and outstanding orders are maintaining production, although government-driven COVID-19 containment measures are restricting movement in Accra and Kumasi. Workers in the timber sector outside the cities have not yet been laid off, and mills outside the lockdown zones are producing for both domestic and international markets. The MIS correspondent for Ghana reports that, should the virus be brought under control and measures lifted, the time needed to ramp up production to pre-crisis levels will vary by company and the number of orders held. Nevertheless, “all things being equal with raw-material availability,” he says, “production levels could be raised [back to pre-crisis levels] within three months.”
Malaysia’s lockdown, which started on 17 March 2020, has been extended to 28 April. This requires everyone to self-isolate at home, and only essential services are allowed. The MIS correspondent for Malaysia reports that production in the forestry and timber sector has slowed drastically, and trade associations are negotiating with authorities to allow at least partial operations. Some states, such as Sarawak and Johor, have permitted scaled-down manufacturing operations.
A survey of members by the Muar Furniture Association found that the cash reserves of 48% of factories had already been exhausted by March 2020. Thirty-eight percent of members indicated that they anticipate losing MYR 1 million–5 million in the next six months, and most members thought the government’s support package would be inadequate to enable them to maintain their businesses.
The MIS correspondent for Indonesia reports that most wood industries in that country are still operating but are slowing production. Some factory operations will continue for the next few months because Indonesia has implemented only a semi-lockdown in Jakarta, beginning 10 April, to be followed by a lockdown in West and East Java in the near future.
Slower production is due to the postponement of orders by importers in Europe, the USA and some Asian markets. Nevertheless, Indonesia’s 2020 first-quarter wood product exports were not seriously affected by the pandemic.
On the time required to ramp up production in Indonesia to pre-crisis levels (should conditions stabilize), the consensus is that it could be more than one year, assuming that the government provides the industry with incentives, such as reduced taxes and low interest rates.
According to media reports, the Secretary General of the Indonesian Furniture and Crafts Industry Association, Abdul Sobur, said that, in addition to the thousands of workers laid off in the retail, hotel, and restaurant sectors, furniture manufacturers have indicated that they have had to (or soon will) lay off some 280 000 workers.
In Myanmar, COVID-19 and measures to combat it are hurting small businesses, and the informal sector is particularly hard hit. Myanmar celebrated its national New Year holiday on 10 April, and all factories were open until then. In response to the pandemic, however, the government has urged “voluntary home stay” and suspended domestic travel. Some orders have been postponed in the timber industry, but it is difficult to get accurate information. Should the virus outbreak be brought under control, it is estimated that the sector will need at least two months to raise production to pre-crisis levels.
The COVID-19 pandemic is having a devastating impact on the timber sector in Viet Nam. The situation is changing fast, and the worst is still to come. Responding to a questionnaire circulated by VIFOREST and its associates, 76% of enterprises said they are facing losses estimated at VND 3.066 trillion (around USD 130 million); only 24% of surveyed enterprises said they are not yet affected financially. More than half of respondents said they have had to reduce production; 35% of enterprises assume that their businesses can be maintained for some time, but closures may be inevitable in the near future; and only 7% of enterprises remain fully operational. The survey also revealed that about 45% of workers in the wood-processing sector have lost their jobs due to the pandemic.
India has extended its lockdown until 3 May 2020 and imposed strict measures to fight the pandemic. India’s economy is at a standstill, and unemployment is at about 20%—although this doesn’t include millions in the informal sector now without incomes.
Indian ports are closed to both imports and exports. Containers cannot move because, in most cases, the receiving ports are closed. Import containers are waiting to be offloaded and transported, but workers cannot travel. Until restrictions are lifted, nothing can move.
The economic impact of COVID-19 and the measures adopted to slow its spread are having a huge impact in Latin American countries.
Brazilian manufacturing activity declined in March at the fastest rate in three years. This has damaged small and medium-sized enterprises, especially those in the informal sector, with lockdown restrictions and containment measures meaning that most workers in the sector are now without incomes.
Brazil’s pulp and paper sector continues to operate, but the production of solid wood products varies by state and municipality. Most states have no significant restrictions, but some municipalities have completely halted industrial operations.
The government has made provisions to mitigate the impacts of worker lay-offs. To date, few timber companies have laid off workers, but the effects of the virus and associated measures are only starting and will intensify in coming weeks. Some domestic and international orders have been cancelled, invoking force majeure.
Forestry and timber operations in Peru have been paralyzed by the nationwide lockdown, which was announced 16 March. All activities in the sector have stopped until further notice.
Road to recovery
These are extraordinary times, and extraordinary measures will be needed to reverse job losses and rebuild revenue flows in the tropical timber sector.
The ITTO survey of TAG members, currently underway, will deliver additional information on the impacts of the pandemic in the tropical timber sector. This will help generate ideas on how best to assist in the recovery of jobs, production and exports in ITTO’s tropical timber-producing member countries—when the worst of the impacts of COVID-19 have passed.
Sumber : https://www.itto.int/news/2020/04/18/pandemic_pandemonium_in_the_tropical_timber_sector/