The supply pipeline of tropical hardwood from Asia and South America is gradually running dry, with logging concessions, log carriers and sawmills across Malaysia and Indonesia paralysed by a diesel shortage flowing from the closure of the Strait of Hormuz. That is according to Robbert Jan Dekker, director of Dutch importer Royal Dekker, who has warned that the timber-chain consequences of the 28 February closure are being severely underestimated.
Industrial diesel in Malaysia and Indonesia has risen 140 per cent since the closure took effect, with the bigger problem now the physical availability of fuel rather than the price, Dekker revealed on LinkedIn late last week.
“Logging in forest concessions has virtually come to a standstill, ships supposed to transport logs are at anchor, and many sawmills have stopped sawing,” Dekker said.
Wood Central understands the diesel cost shock is also adding to longer-running pressures across the tropical hardwood chain, with prices through 2024 and 2025 sitting at historically low levels comparable to seven years earlier, leaving many links in the chain operating at the edge of profitability before the Hormuz closure.
The market response has been a freeze on quotations, Dekker said, with suppliers in many cases unable to set a defensible price and a workable market reference temporarily out of reach.
It comes as the Malaysian Timber Association has called for urgent intervention as the industry faces what it described as a “triple burden” of fuel cost volatility, an expanded sales and service tax, and acute labour shortages, with diesel running at 5.32 ringgit (US$1.34) per litre in Peninsular Malaysia and as much as 5.95 ringgit in parts of East Malaysia, where fuel is also essential for power generation in remote logging operations.
Meanwhile, in Bolivia, where Royal Dekker operates its own FSC-certified concessions and sawmills under the Dekma Bolivia banner, the company has been able to keep production running through its own diesel import licence, as subsidised local diesel is barely available.
Even so, external transporters sometimes wait an entire day at the pump to refuel, and machines and trucks running on lower-quality local diesel are breaking down more often, further pressuring day-to-day logistics. “At the moment, we are primarily concerned about availability in the medium term,” Dekker said.
It comes as the International Energy Agency has characterised the closure as the largest supply disruption in the history of the global oil market, with about 2,000 ships stranded in the Gulf, strait traffic running at roughly five per cent of pre-conflict levels, and the European Union, the United Kingdom and 36 other countries signing a joint statement on safe-passage cooperation.
Dekker warned that shortages and longer delivery times of tropical hardwood for the Dutch interior and construction trade will be more drastic than current market forecasts suggest, with the Asian and South American supply pipeline gradually running dry while industrial diesel in Malaysia and Indonesia sits 140 per cent above pre-closure levels.
