In October 2012 the Myanmar Ministry of Forestry announced it will ban the export of raw teak from 2014 in a bid to increase exports of higher-earning finished products.
Teak Solutions’ Mike Kimble is seeing an impact now, with suppliers stockpiling supplies in anticipation of shortfalls of finished wood currently sourced in India, Thailand, or Malaysia, driving prices up. He predicts prices will get even higher from 2014 because the legislation will enable Myanmar-based businesses to charge a marked up price for the labour involved in milling and finishing their teak, rather than simply selling the raw log at a much lower cost.
The other development impacting the supply chain is the enforced reduction in logging to preserve the country’s teak forests. The Ministry of Forestry's U Win Tun told The Myanmar Times that teak production fell 15 per cent in 2011-12 and is expected to decline by 15 per cent in the 2012-13 financial year. This can only contribute to the scarcity of teak, and therefore its higher price, whilst Kimble has also noticed a decline in the quality of some teak he has recently been receiving. “If that’s an indication of the deforestation laws then yes, it is having an effect,” he said.
The 2014 legislation on raw logs, whilst creating more jobs for the Myanmar people, is a further factor feared to lower the quality of the teak.
“If you ask a wood trader he’ll tell you they can’t cut wood in Myanmar,” said Peter Bakker at Gemini Teak. Kimble is considering opening a mill in Myanmar itself to ensure good quality finishing, but political unrest and uncertainty over how regulations will pan out in practice mean this is not yet a straightforward option.
Sanctions were lifted by the EU on the importation of teak from Myanmar in May 2012 and the US has also since lifted sanctions on teak. But despite this, unlawful trade has continued to occur, with operators smuggling timber through China, under the auspices of the separatist Kachin Independence Army (KIA), which finances its military campaigns through control of the timber trade through the north Myanmar–China border where it holds its headquarters.
However, a second piece of legislation, the EU Timber Regulation (EUTR), due to come into effect in March 2013, is predicted to clamp down on this and add to the market's price hike concerns.
The ruling will make it illegal - and fineable - to import teak that has been cut without permits or to import with a non verifiable, traceable supply chain, such as those run by the KIA.
“Our timber products will be weak in the global market if we can’t follow the Timber Regulation,” Win Tun said, showing there is pressure for Myanmar to comply with legislation.
Indeed Bakker is already bracing for a sea change.
“Smuggling will be impossible; there’s a lot of smuggling towards China and I think that’s what they want to prevent. That would be a problem for us if it changes.”
Either way, there is no alternative to teak from Myanmar for the best superyacht decking, so the industry will therefore have to work within the new legislations, even if that means paying a higher price for the pleasure of a beautiful, durable teak deck.
“There is no other teak for us, we have high standards of quality and it’s only natural grown from Myanmar,” summarised Bakker.
Myanmar Times Article
EU Timber Regulation Law outlined on the EUR-Lex Website
'EU to halt illegal importation of Timber' Article on SuperyachtNews.com
Gemini Teak Profile | Gemini Teak Website
Teak Solutions Website
The Superyacht Management Meeting: Environment & Marpol is on 25 June in Barcelona