Tue 26 Aug 2014
Filed under: Business / Trade,News,Regional
China has a large population with a huge demand for everything. The short supply of raw teak material has become increasingly evident. Teak is tropical and grows between the two tropics. Only a small amount could be produced in Guangdong, Yunnan and Spratly in China. Meanwhile, China enjoys a huge teak market, with teak furniture and floor being the most popular items for Chinese. Faced with the shortage of teak supply, teak businesses turn their attention to overseas markets to increase the import of teak, especially from Southeast Asian countries such as Myanmar and Vietnam.
Myanmar is one of the countries with the highest biological diversity. Many of its precious teak wood is highly sought after in the Chinese furniture market. Although the forest coverage and teak reserves have been dwindling in the past several decades, logging and smuggling of teak have reached a historical high in the past three years. The damage to the environment and biological balance is tremendous.
According to statistics from Myanmar, Myanmar exported a total of 610,000 tons of timber in the first quarter of 2014, which increased 107.8%. The monetary value of the export was 330 million USD, an increase of 184.5% from the previous year. In 2013 alone, Myanmar sold 237,000 cubic meters of teak to China, which tripled the volume of 2012. The big increase in timber exports led the Myanmar government to release a statement that in order to ensure the sustainable development of forest resources and maintain environmental protection and biological diversity, Myanmar will upgrade its teak export ban to a timber export ban, as well as imposing restrictions on the export of finished furniture products starting from April 1, 2014.
Since the ban, Myanmar’s timber export revenue was less than 10% that of the same period last year. Between April 1 and July 18, 2014, Myanmar only exported 14.44 million USD worth of timber (4.85 million by state-owned companies and 9.59 million by private companies), while the total export from the last fiscal year was 158 million USD.
As the largest importer of Myanmar timber, China’s teak market is seriously affected by Myanmar’s export restrictions. Teak prices have risen exponentially. Speculators use the business opportunity to flush the system with new investment. They buy out the teak materials and control the volume available on the market. The price of teak is continuously chased up.
China has a socialist market economy managed by both visible and invisible hands. The chaos of the teak market begs management by the visible hand since the invisible hand has failed.