Lower margins are predicted for Malaysia’s timber industry this year due to de-pegging of the ringgit to the US dollar and higher prices for logs and crude oil.

Companies in the sector say high tropical log prices have benefited logging operations but negatively impact profitability of timber companies, particularly plywood producers.

Ta Ann Holdings Bhd of Sarawak says currency de-pegging has reduced export proceeds by virtue of a stronger ringgit. But it believes the effect will be gradual and limited.

Plywood company Cymao Holdings Bhd described the de-pegging as “untimely”, as plywood prices are adjusting because of an influx of Chinese softwood plywood into the US. It expects prices to remain low for the remainder of 2005, especially due to a sluggish Japanese market.

The company is looking for additional log supply sources to help keep a healthy log-to-plywood price ratio.