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FOREST INDUSTRIES IN THAILAND

Forestry and logging


In Thailand, forest exploitation was practiced before the establishment of the Royal Forest Department. Commercial forest products harvesting started when teak was in demand both domestically and from abroad.

Table 3: Price and production of timber and major forest products in 1963

Name/Species

Unit

Price/unit(Baht/m3)

Price (Baht)

Timber

Teak

Dalbergia cochinchinnensis

Dalbergia oliverli

Pterocarpus macrocarpus

Xylia kerrii

Lagerstroemia calyculata

Shorea obtusa

Dipterocarpus alatus

Hopea spp

Lagerstroemia speciosa

Diospyros mollis

Dipterocarpus obtusifolia

Others

Major Forest Products

Fuel wood

Charcoal

Barks

Wood Tar

Resin

Incense wood

Turpentine

Turpentine Oil

Oleo Resin

Total

143,977 m3

779 m3

744 m3

21,942 m3

95,207 m3

22,561m3

176,643 m3

462,039 m3

138,771m3

1,932 m3

68 m3

59,379 m3

559,030 m3

1,479,706 m3

655,061 m3

136,619 hab

240,615decalitre

244,738 kg

90 hab

35,198 kg

159,238 kg

3,116 kg

2,050

1,853

1,746

625

625

398

625

504

617

550

2,470

410

250

43

210

57

31

6

412

4

7

0.60

295,152,850

1,443,487

1,299,042

13,713,750

59,504,375

8,979,278

110,401,875

232,867,656

85,621,707

1,062,600

167,960

24,345,390

139,757,500

63,627,358

137,562,810

7,787,283

7,459,065

1,468,428

37,080

140,792

1,114,666

1,869

1,193,516,812

Source: Thiem Komkit 1965, Forestry in Thailand

Table 3 shows the production of timber, major forest products and their price in 1963. The most expensive price were Disospyros mollis (Ebony), Tectona grandis (Teak) and Dalbergia cochinchinensis respectively. The total price of timber production and forest products from forests were 1,193,516,812 Baht.

Logs


Average annual domestic log production, in 1961-1988, was around 2.2 million cubic metres (Table 4). After that the log production declines due to the logging ban.

Table 4: Wood production from forests 1961-1996

Source: 1. Royal Forest Department Fact Sheet 2. Forest Annual Report 1968 3. Forestry Statistics of Thailand 1982,1990

4. Author

Consumption


In 1978, log consumption in Thailand was 3.1 million cubic metres, of which domestic supply was 2.6 million cubic metres, and import supply was 0.5 million cubic metres, and export production was 0.03 million cubic metres.

Import


Log imports have been significantly increasing since 1988 (Table 5). Logs are imported from Asian countries: Indonesia, Myanmar, Kampuchea, Laos.

Wood-based industry


The present and future generations of the Thai people require wood products to satisfy a variety of needs. In 1990 consumption of industrial wood products (poles, sawnwood, wood-based panels, and paper products) was equivalent to about 20 million cubic metres of wood raw material. As both the population and the economy of the country continue to grow, and even allowing for substitution by other materials, the demand for wood products is expected to grow even more.

The domestic wood-based industry is trying to meet the country's needs, but it is faced with a shortage of raw material. The logging ban, which is necessary to protect the rapidly diminishing forests, has drastically cut wood supplies. The industry has to rely to a great extent on imported wood, as well as on rubber and other plantation-grown wood, and even on illegally harvested wood. The insecure raw material base has stifled any move to modernize the industry and make it competitive. Large and increasing quantities of processed wood products are imported, placing a heavy burden on the trade balance, instead of the forestry sector bringing sector bringing in foreign exchange as in the past.

Table 5: Domestic wood apparent consumption unit: 1,000 cu m.

Year

(1)

Wood Production

(2)

Imports

(3)

Exports

(4)=(1)+(2)-(3)

Domestic Wood

Apparent Consumption

1978

2,608.7

515.0

33.5

3,090.2

1979

3,100.7

1,033.1

7.7

4.126.1

1980

2,544.2

434.3

1.5

2,977.0

1981

1,798.6

575.6

7.8

2,366.4

1982

1,769.4

488.5

1.5

2,256.4

1983

1,819.7

630.4

1.7

2,448.4

1984

2,031.7

581.5

6.7

2,606.5

1985

1,882.6

418.2

11.2

2,289.6

1986

2,014.7

348.7

29.2

2,334.2

1987

2,149.0

725.2

112.0

2,762.2

1988

2,048.1

1,123.3

181.1

2,990.3

1989

919.0

2,508.0

53.3

3,373.7

1990

491.6

3,340.9

48.6

3,783.9

1991

231.5

3,280.8

57.8

3,454.5

1992

119.4

3,814.4

45.1

3,888.7

1993

64.9

3,168.2

53.8

3,179.3

1994

62.3

4,065.7

62.4

4,065.6

1995

34.9

3,463.6

80.5

3,418.0

1996

43.9

3,151.8

45.4

3,150.3

Source: 1. Forestry Statistics of Thailand 1982, 1990 and 1996, Royal Forest Department 2.Department of Customs

It is predicted that the demand for industrial wood raw material will more than triple to about 65 million cubic metres by 2015. In spite of the growing demand, the present situation does not encourage domestic wood production. A review of the present investment climate for forest plantations has shown that the policy, legal and land-tenure conditions are not supportive, and in some cases repressive. The new Forest Plantation Act of 1992 is considered to be particularly unsupportive in that it imposes unnecessary bureaucratic controls on those wishing to invest. Consequently, major private sector investors are looking outside Thailand for land on which to produce industrial wood. Moreover, an analysis of the situation has revealed that there is no agency in Thailand that is accountable for the country's future wood supplies, or for providing relevant advice to Government. The Royal Forest Department, for example, has been ordered to refocus its operations on conservation, and to continue enforcing a ban on commercial-scale reforestation.

Demand for wood products


Methodology for projecting demand

The demand projections presented in this report are conditional, in that they provide information about potential demand, assuming no restrictions with respect to wood supply, international trade, and other relevant variables. Wood-products demand projections were made on the basis of an analysis of the relation between the demand for the given product and the factors underlying demand behaviour, as determined from an analysis of consumption patterns by both econometric and qualitative end-use analysis.

For each product, two models were developed separately: a time series model based on time series data on consumption in the country in 1970-1989, and a cross-section model based on pooled 1989 data from several countries. The general form used for both the time series and cross-section models is:

where C is consumption of the given product, and xi represents explanatory variables such as GDP, population growth, number of households, disposable income, gross fixed capital formation, and others. Apparent consumption is calculated as production + imports - exports.

The basic form for both models is double logarithmic, that is:

where C is consumption per capita, xi is real GDP per capita, A is the intercept, B represents directly the income elasticity of demand, and e is the error term. In the case of sawnwood and plywood, price variable have been added to get information on price elasticity and cross-price elasticity of demand. Also, gross fixed capital formation in construction (deflated by the implicit GDP price index) has been added.

The options for estimating the income elasticity of demand are as follows:

(1) by the time-series model;

(2) by the cross-section model using data for continues with 1989 per capita income of less than US$ 5,000 (the group to which Thailand belongs);

(3) by the cross-section model using data for countries with 1989 per capita income of less than US$ 10,000.

Option (1) is preferred, but where no reliable estimates could be obtained, then option (2) was used. Option (3) was used only when no reliable estimates could be obtained for (1) or (2).

Time series data on the Thai wood-based industry were obtained from FAO statistics, Jaakko Poyry Oy data banks, and forestry statistics of Thailand. More detailed import and export data were obtained from the Department of Customs. Data on international production, trade, consumption, population, and GDP were obtained from FAO statistics and Jaakko Poyry data banks.

In evaluating the models, standard econometric and statistical criteria were used, with special attention paid to the standard error of forecast and adjusted R2. In practice, time series data for the mechanical wood industry, particularly on production, were found to be unreliable, so that for each product the income elasticity of demand was obtained from the cross-section model.

To make the demand projections for each product, 1990 was used as the base year with real per capita GDP, and population growth projections obtained from TDRI and NESDB. A summary of these projections is shown in Table 3 Special attention was paid to getting accurate consumption figures for the base year 1990, because relatively small differences in the base year figure may result in large differences at the end of the 25-year projection period. A comprehensive field survey for sawnwood was carried out for this purpose. The projections focus on long term trends instead of short term changes and therefore they are presented at five-year intervals.

Table 6: Population and GDP data (1972-1987) and projections (1992-2017) for Thailand

Year

Population

(,000)

Population

growth

(%)

Real GDP

(million

1989 US$)

Real GDP

growth (%)

Real GDP

per capita

(1989 US$)

Real GDP

per capita

growth (%)

1972

38,590

2.93

20,403

4.85

528.7

1.86

1977

44,040

2.51

29,394

7.21

667.4

4.58

1982

48,740

2.09

40,153

4.09

823.8

1.95

1987

53,600

1.80

54,858

9.47

1,023.5

7.53

1992

57,732

1.45

89,820

8.60

1,555.8

7.05

1997

61,768

1.28

132,218

7.80

2,140.6

6.44

2002

65,582

0.97

187,262

6.35

2,855.4

5.16

2007

69,121

0.95

249,958

5.72

3,616.3

4.70

2012

72,476

0.95

330,105

5.72

4,554.7

4.73

2017

75,984

0.95

435,951

5.72

5,737.9

4.73

Source: Based on TDRI and NESDB projections.

Sawnwood


Hardwood sawnwood produced in Thailand in 1990 was estimated at 1.84 million m3 including 0.15 million m3 of sawnwood produced from domestic log supply, 0.55 million m3 of sawnwood produced from imported logs, and 1.14 million m3 of sawnwood produced from unrecorded fallings. In addition 0.54 million m3 of sawnwood was produced from rubber wood. The country imported 1.48 m3 of sawnwood, but it also exported 0.05 million m3.

Sawnwood consumption in 1990 was 3.28 million m3, excluding sawn rubber wood. About 90 percent of the sawnwood consumed was used in construction and joinery manufacture, while the remaining 10 percent was used in furniture manufacture. Demand for sawn hardwood is expected to grow at the rate of 4 percent per year and to reach about 9.28 million m3 in 2017 (Table 7). Demand for sawn rubber wood is expected to grow at the rate of 2 percent per year and to reach about 0.96 million m3 in 2017.

Table 7: Projected demand for sawnwood (million m3)

Product

1992

1997

2002

2007

2012

2017

Sawn wood

3.52

4.42

5.59

6.69

7.90

9.28

Sawn rubberwood

0.56

0.63

0.70

0.78

0.86

0.96

Total sawnwood

4.08

5.05

6.29

7.47

8.76

10.24

Source: Montree and et. al, 1995

The figures in Table 7 are based on the assumption that in 1991-1994 the overall rate of substitution of sawnwood by other materials would be 3 percent per year and 1 percent per year in 1995-2017, so that by 2017 demand would be two-thirds of what it would have been if there were no substitution.

The annual consumption of sawn hardwood is expected to increase from 58.4 m3/1000 persons in 1990 to 122.2 m3/1000 persons in 2017. In comparison, in 1989 the sawnwood consumption was 183.3 m3/1000 persons in Malaysia, 121.5 m3/1000 persons in Korea, and about 400 m3/1000 persons in OECD countries. As Thailand's sawnwood consumption is still at a low level, the potential for increased demand is evident despite ongoing substitution of other materials for sawnwood.

Plywood and veneer


Production of plywood (including blockboard) and veneer in 1990 was estimated to be 398,000 m3, comprising 336,000 m3 of plywood and 62,000 m3 of veneer. The country imported 1,255 m3 of plywood, 2,261 m3 of veneer, and 18,475 m3 of veneer, and 1,654 m3 of veneered panels.

Total consumption of plywood and veneer in 1990 was approximately 413,000 m3. About 75 percent of the plywood consumed was used in construction, 20 percent in furniture manufacture, and 5 percent in other uses such as containers and advertising boards. Other materials are increasingly being substituted for plywood, mainly because of increasing scarcity of veneer logs and the high tariffs (60 percent ) on imported plywood.

However, demand for plywood is expected to grow at the rate of 4.3 percent per annum and to reach about 1,276,000 m3 in 2017, because continued GDP and population growth will boost demand in construction and furniture manufacture. Table 8 show the projected demand for plywood, blockboard, and veneer, assuming a 1 percent annual rate of substitution. By 2017 demand would be three-quarters of what it would have been if there were no substitution.

Table 8: Projected demand for plywood, blockboard, and veneer

 

1992

1997

2002

2007

2012

2017

`000 m3

462

604

764

916

1,083

1,276

m3/1000 persons

8.0

9.8

11.6

13.2

14.9

16.8

Source: Montree and et. al, 1995

The annual consumption of plywood and veneer is expected to increase from 7.4 m3/1000 persons in 1990 to 16.8 m3/1000 persons in 2017. The projected per capita annual consumption of plywood and veneer in 2017 would be slightly less than the current consumption in Malaysia, but only about 50 percent of the current consumption in South Korea. As Thailand's level of consumption is still low, the potential for increased demand is evident despite ongoing substitution of other materials for plywood.

Other wood-based panels


Other wood-based panels include two major product aggregates: fibreboard - hardboard, medium density fibreboard (MDF), and softboard - and particleboard (of various types). Those produced in Thailand are hardboard, MDF, and ordinary particleboard.

Production of fibreboard and particleboard in 1990 was estimated to be 121,800 m3 and 178,000 m3, respectively. The country imported 4,700 m3 of fibreboard and 16,700 m3 of particleboard, but it also exported 300 m3 of fibreboard and 2,600 m3 of particleboard.

Consumption of fibreboard and particleboard in 1990 was estimated to be 126,200 m3 and 192,100 m3, respectively. The main end use for particleboard and MDF is furniture manufacture. The main end uses for hardboard are panelling - 50 percent; packaging, loudspeakers, car interiors, and similar uses - 40 percent; and low quality furniture - 10 percent.

Demand for these wood-based panels is expected to grow for a number of reasons, mainly that substitution for sawnwood and plywood are needed because of the increasing scarcity of sawlogs and plylogs, and because of growing demand for the end-use products. Demand for fibreboard is expected to grow at the rate of 6 percent per year and to reach about 573,000 m3 in 2017, while demand for particleboard is expected to grow at the rate of 7.5 percent per year and to reach 1.29 million m3 in 2017. These high growth rates are possible only if increasing domestic supplies of rubber wood, other plantation grown wood, and wood waste from sawmills and plywood mills, or low duty wood imports, can be secured. Table 6 show the projected demand for fibreboard and particleboard.

Table 9: Projected demand for fibreboard and particleboard, ,000 m3

 

1992

1997

2002

2007

2012

2017

Fibreboard

148

221

308

390

478

573

Particleboard

234

373

553

752

992

1,286

Source: Montree and et. al, 1995

The annual consumption of fibreboard is expected to increase from 2.2 m3/1000 persons in 1990 to 7.5 m3/1000 persons in 2017, while that of particleboard is expected to increase from 3.4 m3/1000 persons in 1990 to 16.9 m3/1000 persons in 2017. In comparison with other countries, per capita consumption of these products is still quite low.

Furniture and joinery products


Furniture industry. The Thai furniture industry has three segments: export furniture production, official production for the domestic market, and non-recorded furniture production for the local and national markets. There are no aggregate statistics on production, capacity, and raw material use in the Thai furniture industry.

Expansion is export driven. Promotion and incentives have been provided by the government in its drive to make Thailand one of the largest furniture production centres in Asia. Total furniture exports in 1990 were worth 6,115 million baht (US$ 240 million) of which wooden furniture accounted for 2,582 million baht (US$ 101.7 million). The value of wooden furniture exports is many times that of such products as wood-based panels or sawnwood, and is double that of pulp and paper products. The export of furniture and parts was one of fastest growing export sectors in Thailand in the 1980s. In terms of value, growth was about 47 percent annually in 1986-1990. Growth in early 1991 compared well with growth in the same period in 1990, which gives an indication that the upward trend in the furniture industry will continue.

The manufacture of rubber wood furniture and parts is the fastest growing subsector within the furniture industry. Rubber wood furniture accounts for 80-85 percent of total wooden furniture exports. Out of the total rubber wood furniture production, about 65 percent is exported. About 560,000 m3 of sawn rubber wood are used annually in furniture manufacture. Growth of the rubber wood furniture industry is expected to continue for a number of reasons, the most notable of which are the abundance of the raw material, increasing scarcity of other raw materials such as hardwood and rattan, wood scarcity faced by major competitors such as Taiwan, growing international demand, and government support.

The main markets for wooden furniture are Japan and USA, both of which are growing markets for rubber wood furniture. These two countries accounted for about 79 percent of furniture exports in 1990. Hong Kong, France, and the United Kingdom are other important markets. Prospects in the domestic market are also good because of the increased purchasing power of the Thai people, the growth in the construction sector which implies increased demand for furniture, and the preference of consumers for wooden furniture.

Joinery and other wood converting industry. This industry comprises a wide range of enterprises such as parquet, match, door, window frame, kitchen cabinets, wooden utensil, wooden frame, and wooden toy manufacture. There are no production statistics on these industries, and this sector is of small importance from the viewpoint of total wood use. Only about 5-10 percent of total sawnwood is converted, and residues from sawmills and plywood mills can be used in the manufacture of these products. However, together with wooden furniture exports, this is a major wood-based export sector. In 1990 the value of the exports of converted wood products amounted to US$ 123.6 million.

Imports of wooden furniture and joinery products have been kept at a marginal level by import duties together with abundant domestic supply. The duty on wooden furniture is 80 percent and on joinery products, 40 percent.

Paper and paperboard


The Thai paper and paperboard industries have expanded fast. In 1985 total paper and paperboard capacity was only 585,750 ton per year. The current capacity is 993,000 ton per year. Most of the paper production capacity increase has been in kraft paper. Newsprint is not produced in the country at present.

Domestic production of paper and paperboard was 877,400 t in 1990, corresponding to an 89 percent capacity utilization rate, up from 766,200 t in 1989. Importation in 1990 was 367,900 t, up from 252,400 t in 1989. Consumption in 1990 was 1.144 million t, representing a 19.6 percent increase from 0.957 million t in 1989.

The Thai paper markets are dominated by packaging paper. Kraft paper accounts for 51.6 percent and paperboard 13 percent of the country's total paper consumption. The market share of printing and writing paper is 18.8 percent, newsprint 13.2 percent, and tissue 3.4 percent.

The demand prospects for paper and paperboard are as follows:

· Newsprint. Demand for newsprint will be influenced positively by an increase in total circulation, economic growth influencing the level of advertising and circulation, and the competitive position of newspaper advertising relative to television and radio advertising.

· Printing and writing paper. Demand for printing and writing paper will be positively influenced by an increase in population and particularly of the student population, increased consumer spending power and substitution of coated grades for newsprint because of increased competition in advertising, growth of an export oriented printing industry, the use of computers and copy machines, and the position of Thailand as the printing industry centre of the ASEAN Chamber of Commerce.

· Linerboard and fluting. As the whole general manufacturing sector is expected to grow fast in the 1990s and exports will increase, demand for corrugating materials will also increase. Although exports are unlikely to continue expanding at rates approximating 20 percent as in the past, the growth in export packaging together with domestic packaging will be high enough to support an expansion of the domestic corrugating material industry. In 1992 alone the packaging sector is forecast to grow by 15 percent.

· Cartonboard. Demand for cartonboards is exported to grow together with the Thai economy and the expansion of exports. Demand determinants are largely the same as for linerboard and fluting.

· Sack paper. The major consumer of sacks is the cement industry. Other important end uses are packaging of fertilizers and chemicals. Sack paper demand is therefore strongly affected by fluctuations in construction and bottlenecks in cement production. Construction in the country has grown at annual rates approaching 20 percent in the last few years. Domestic cement production has been unable to meet demand, but in a few years it is expected to meet even an increased domestic demand, which in turn means that demand for sack paper will increase. The present relative slump in the construction sector will mean that the growth rate in the construction industry will decrease, but it is expected that it will still be about 10 percent in 1992 and would average about 9 percent in the next five years.

· Tissue. Demand for tissue paper will be positively influenced by increased standards of living, growth of the middle class, increased standards of hygiene, expansion of the hotel business, and westernization.

In 2017 total paper demand is projected to be about 7.3 million t, corresponding to an increase of 6.2 million t in 27 years, and an average annual growth rate of 6.7 percent (Table 10). Per capita consumption of paper in 2017 will be 92 kg compared to 20 kg in 1990. However, Thailand's per capita consumption in 2017 would still be lower than South Korea's in 1990.

Table 10 shows the average annual growth rate by product type over the 25 year period. During the first five years the growth rates will be higher than the average annual rate, but growth will even out later. This applies especially to all packaging paper and board, which may experience growth rates higher than 15 percent in the next 2-3 years. The demand for industrial grades depends a lot on the development of exports, which in turn depends on the competitiveness of Thai manufacturing industries and on the global trade environment.

In spite of the rapid growth of the Thai paper industry, the country was still a net importer of all grades in 1990. Imports exceeded exports by US$ 271 million. However, by around 1992-1995 Thailand will be self sufficient in all grades except newsprint and printing and writing papers.

Table 10: Projected demand for paper and paperboard, '000 t/year

Product

1992

1997

2002

2007

2012

2017

Growth/year

Newsprint

163

211

265

321

385

446

4.1%

Printing/writing

256

415

622

852

1,130

1,415

7.1%

Kraft paper

738

1,204

1,806

2,443

3,199

3,850

6.8%

Paperboard

186

303

460

642

840

1,054

7.2%

Tissue

48

73

101

131

165

206

6.0%

Total, excl.

newsprint and printing

973

1,579

2,366

3,215

4,204

5109

6.9%

Total

1,392

2,205

3,253

4,388

5,719

6,970

6.7%

Per capita, kg

24.1

35.7

49.6

63.5

78.9

91.7

5.5%

Source: TFSMP 1993-Subsectoral Plan for Production and Utilization

Paper-making fibre


In 1990 the total fibre consumption in Thailand was 945,200 t. Of this 670,000 t (71 percent) was from waste paper and 275,200 t (29 percent) was virgin fibre pulp. Domestic production of fibre in 1990 was 615,200 t consisting of waste (74 percent) and non-wood pulp (26 percent). The use of eucalypts in pulp production is still negligible (less than 1 percent). The country imported 333,200 t of fibre in 1990 and exported 3,143 t. Waste paper accounted for nearly 65 percent of imports, the rest was pulp.

The future demand for pulp and other paper making fibres will depend on the development of the domestic production of paper and paperboard and the future grade composition. In relation to the future demand, the future level of production will depend on the economics of production compared with importing both paper, pulp, and other fibres. Naturally, when planning new investments in the pulp industry, the availability of domestic resources is the main issue. Three scenarios for fibre consumption in paper making were developed, namely the current trends scenario, the self sufficiency scenario, and the Master Plan scenario. The current trends scenario is also referred to as constant capacity scenario because it assumes that once the processing plants in the pipeline come on stream, no further plants will be established. Under the self sufficiency scenario, all paper and pulp products will be produced locally. Table 11 show the projected demand for pulp and waste paper.

Table 11: Projected consumption of paper making fibres, `000 t/year

Scenario

1992

1997

2002

2007

2012

2017

Current trends

1,724

2,476

2,476

2,476

2,476

2,476

Self sufficiency

1,724

2,781

3,505

4,727

6,161

7,509

Master Plan

1,724

2,617

3,202

4,364

4,364

6,803

Source: Source: TFSMP 1993-Subsectoral Plan for Production and Utilization

Poles


About 1.9 million m3 of poles are used, for both structural and non-structural purposes, in the residential and industrial construction sector. The main end uses in the residential sector are pilings, stilts, and frames. In addition poles are used as house fillers and fences. The use of poles in the residential sector is limited mostly to rural areas. In the construction sector, the use of poles is limited to structural applications such as posts and pilings. In both of these end uses, other materials such as concrete and steel are being substituted for poles. The use of poles for pilings and scaffolding has also declined. Substitution is expected to continue and increase. Absolute demand for wooden poles may remain at present levels, or even decline in the coming years because of substitution.

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