Challenging times ahead, but market diversification helps
By PAULINE NG
IN KUALA LUMPUR
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MALAYSIA'S furniture manufacturers showed surprising resilience, growing 2 per cent last year in spite of the sharp slump in the American housing market.
After raking sales of RM8.72 billion (S$3.6 billion) last year, the real challenge will come this year as more economies slow down.
January's manufacturing statistics point to much tougher times, with furniture output down by 37 per cent. Furniture exports had expanded 4.7 per cent in the last quarter.
China, the world's biggest furniture exporter, is already reeling from the collapse in demand from the United States - the world's largest importer to which it supplies half of its exports - with capacity utilisation at some plants reportedly running at half.
There has been some trailing off of orders for Malaysian furniture makers, and exports are expected to decline by 10 to 20 per cent this year, Malaysian Furniture Promotion Council chairman Merlyn Kasimir told BT, adding it was 'reasonable, considering the economic situation.'
That Malaysia has been less affected is due to recent market diversification. The reliance on its main market, the US, has gradually been reduced to 20 per cent.
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Markets seen as having the greatest potential for higher furniture consumption include the Middle East, South Africa, India, Russia, Singapore and Eastern Europe.
Indeed a number of exhibitors at the recent Malaysian International Furniture Fair 2009 (MIFF) in Kuala Lumpur said the US was not a major market for them anymore.
'Business is down, but it's a question of how much,' shrugged Willy Steel export executive Thon Pang Kai. The US and UK are not export markets for its office furniture which is sold to more than 10 countries. Africa is where the potential now is, Mr Thon said.
Product diversification has also helped. Marketing manager SH Tan of WoodView Products which specialises in rubberwood and hardwood sets said MIFF 2009 was quieter with fewer enquiries, but was nonetheless still upbeat.
'Orders for our indoor furniture are a bit less but this is off-set by an increase in orders for outdoor sets,' he said of the Penang- based firm which sells about RM1 million worth of furniture monthly to South Africa, Japan, Singapore, the Middle-East, France and Australia.
Even companies that saw fewer orders last year claim they are back to full capacity.
Latitude Tree Holdings said orders were down in the past six months but back at full capacity now.
U-Panel Furniture Industry also said business was 'back to normal' in December after a 40 per cent order drop in July. But he conceded 'a small discount' is sometimes necessary.
Four fifths of all furniture produced is exported and Mr Kasimir expects a clearer picture next month. But despite the softening, he said feedback from two recent furniture fairs had been encouraging.
At the MIFF, Ali Jaafar told BT most of the furniture for his two shops in Iraq is from China. 'But Malaysian quality is better, and if there is a good discount, maybe I will buy a lot more.'
Since it began in 2000, the annual MIFF has managed to register higher sales every year except for 2003.
The MIFF achieved sales of US$690 million last year and had targeted US$700 million from the five-day exhibition this year.
Whether it meets its target would only be known next month.
For niche furniture makers, there's been no lull in orders. Not competing in the mainstream wooden furniture - mainly rubberwood - which accounts for 80 per cent of the country's furniture exports, DP Design said business is good.
The family run company uses rattan, sea grass and abaca to hand-make furniture, which is produced at a factory in Indonesia and sold locally as well as exported to the Middle East and Europe.
'Things are better this year as we have become better known,' smiled its owner Rahimah Husin.
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