The Teak market has been all abuzz about the the trade sanctions being lifted against Myanmar. Being able to buy “genuine” Teak direct could be very good for the market. The realities we are discovering is that we are far from answers on the legalities of the lumber, concerns about quality control have been raised, and a looming log ban will essentially drop inventories to zero. The already climbing price for Teak is about to get a boost, and one has to wonder just how much higher it can go before the species gets abandoned. Like I said, there is still a lot to sort out with this new market, so rather than speculate, let’s address what we know. The log ban scheduled for April of 2014 will produce a dramatic – if not total – drop of near term inventory for export.
Myanmar forests have always been known to have a sterling reputation for sustainable management. However, during the last 5 decades of military regime rule, we have had no insight into how the forests have been managed. One thing we do know is that demand for Teak has only increased during that time, so it is reasonable to suggest that stronger regulations be instituted to protect the natural resources of Myanmar.
The log ban is a move in the right direction that many other countries have chosen to great effect. Essentially, the share of work has been shifted so that log processing will have to be performed in Myanmar. It is a massive shift to the economy, transforming a log export nation into a sawmill and lumber export nation. It stands to make illegal export much easier to control while infusing an enormous amount of industry and jobs to the emerging economy.
At the same time, the Myanmar government has announced reductions in harvest amounts each year. Right now, only about 60% of the timber once available can be harvested. An additional 20% reduction is expected this year.
These are exciting measures, as they have the potential to maintain a healthy forest and, in the long run, increase the quality of the Teak coming to the market. This MUST be said, because any lumber company should be excited by an action that protects the forest and makes better quality control possible. This means a better product and a bright future for the species.
However, change is always painful, and we have a long way to go before the news is bright and sunny again. In April of 2014, it becomes illegal to export Teak logs from Myanmar. The companies doing business in Myanmar now will continue to ship logs as fast as they can up until the last minute, so it is reasonable to expect that log yards will be empty come midnight on March 31st, 2014.
On average, a delay of a few months to sometimes even 8 months is to be expected from the time when a new tree is felled to when the log hits an export yard. After the ban these logs will need to be sawn in Myanmar, so additional time (another 6-8 months) is needed for the sawing and seasoning of the material before it can be transported to a port city and shipped out for a 45 day tour on the high seas. Add it up, and you have a period of 14-18 months where no new Teak lumber will be available.
Now let’s complicate it further by saying that the amount of Teak harvested after the log ban could actually be 20-40% less than the volumes we have now. Can you imagine what this will do to the price of Teak? I have a hard time wrapping my head around that, especially in a society where product shortages mean having to wait 2 weeks for Apple to ship more iPhones. Teak is one of the most expensive species on the market today. If a major increase hits, many users will be forced to seek alternatives.
This may not be a bad thing in the long run, as only a drop in demand can truly help the Teak market to correct itself. In the meantime, we need to get used to lower volumes of Teak and a different grade of material. The mantra for now should be:
- Do you really need Teak for that job?
- What are the narrowest and shortest boards you can use?
J. Gibson McIlvain is still one of the largest importers of Teak, and we still have a sizable inventory of Teak. We pride ourselves on being able to carry a wide variety of sizes, and we should be able to maintain that for a while. The fact remains that wider and longer boards will become much harder to get in the coming months, and the two points listed above MUST be considered on every job.