Why are teak prices rising?

Teak prices are rising because of increased demand (largely from the emerging economies of India and China) and decreased supply (only 3% of the worlds teak production comes from plantation sources with the rest from natural forests and world opinion is thankfully against the continued logging of natural forests.

Mr. H. S. Anantha Padmanabha, produced a very interesting International Teak Market Rerport for a proposed Australian teak plantation in which he mentions:

"India
In India, teak harvesting in natural forests was banned in 1982 and in 1997 the
Supreme Court of India ordered further restrictions on the felling of timber of any kind
in the natural forests of India.

In the early 1980’s the total size of the teak market in India was 7.5 million m3 per
year. All teak logs now consumed in India are now imported. Total teak log imports
into India in the past 12 months were approximately 2.5 million m3, with 60% of total
teak imports coming from countries in West Africa.

Even though India has established significant areas of teak plantations, as a
consequence of native teak logging bans in Asia, the Indian teak market was forced to
find alternative teak supplies. For the past 15 years the Indian teak market has
imported teak logs from plantations grown in African countries, including Nigeria,
Benin, Togo, Ivory Coast and Ghana. It is now widely recognized within the teak
industry that the supply of teak logs from Africa will be totally exhausted in the next 5
years. As a response, the Indian teak market is now importing young plantation teak
logs (ranging in age from 6 to 15 years old) from Central and South America, including
Panama, Costa Rica, Columbia and Brazil.

Thailand
Thailand banned teak harvesting in natural forests in 1989.

Myanmar (formerly known as Burma)
Myanmar is the only country in the world now supplying teak from natural forests.

Indonesia
Even though Indonesia has large teak plantations, there is a total ban on exporting
teak logs. Teak logs in Indonesia are entirely supplied to domestic industries, such as
furniture manufacturers and is then exported as finished furniture products.


NEW PLANTATIONS
Due to the dramatic decrease in teak supply from natural forests and the increasing
demand for teak timber, the future of teak production can only come from new teak
plantations."


"Over the last 30 years, teak log prices have increased at an average rate of
8.3% per annum compounded. The basis for the sharp increase is due to
rapidly declining supply and rising demand. Teak log prices in the past 12
months have risen 15% in the premium log categories."


"CONCLUSION
In India and elsewhere, the natural forests of teak alone will not be able to meet the
current and future demand for teak.

Demand for teak in the past 10 years has risen. Supply in the past 10 years has
rapidly declined and is forecasted to decline at an even more rapid rate. It is widely
believed that the supply of teak into India from West Africa (from which 60% of India’s
current imports originate will be completely at an end in 5 years time). In other words,
the supply from West Africa of 1.5 million m3 per annum of teak (60% of 2.5 million
m3 per annum of Indian imports of teak each year) will cease fully in only 5 years time.
Teak prices in the past 15 years have risen at more than 7% per annum compounded.
Teak prices in the past 12 months have risen 15% in the premium log categories.

Illegal felling of teak in West Africa and Indonesia and other countries is on the rise, a
clear indication of rapidly rising prices and rapidly falling supply.

Only 22 years ago (1982), the domestic Indian market consumed more than 7.5
million m3 of teak per annum (3 times more than it does today).

Due to chronic over harvesting around the world, illegal felling and only a small
sustainable teak plantation industry (ie. That occurring in Australia, Brazil and Costa
Rica), that Indian domestic consumption figure has fallen to only 2.5 million m3 per
annum."

To download the full report just click here.

Then have a look at our website www.costaricainvest.ie and have a look at our teak backed development land opportunities.