Wescorp Market Summary for July 2009.Sales are similar to last...

Wescorp Market Summary for July 2009.

Sales are similar to last year for powder and pre-grind. There has been a shortage of raw sandalwood in the market and there is particularly a short supply of Unclean Logs (spicatum). For the first part of the financial year after “the melt down” no one wanted to carry stock and buyers were uncertain of the future. Fortunately after Chinese New Year, the prices were increased and sales proceed to normal levels.
Pacific sandalwood has been very slow with the uncertainty of “democracy” in the region and Fiji devaluing the currency. Oil sales have been slow from the region and many end users are letting there stocks run low and carrying much smaller quantities. The price for some of the oils has dropped by up to 20% even though this is with small volumes.
In slow markets that exist at the moment it is much harder to sell low value products that can be replaced with other products and substitute woods. Sapwood (plantation thinnings) has come down in demand and the price may have to be dropped to achieve sales in the future. Twelve months ago, this was selling very well.
There are some sales of plantation album sapwood from the Ord happening in the last 9 months and this product is generally preferred to spicatum sapwood. We expect larger volumes to come onto the market in the next few years and we are working with buyers in Asia to develop a long term strategy for spicatum sapwoods acceptance and price stability.
The Chinese market is continuing to grow and demand outstrips supply for much of the higher quality products. Unfortunately their main growth is still in the lower end of the market quality but this continues to improve. Wescorp remain confident that there is still about 500,000 tonne of product going into the agarbatti industry worldwide per annum. The “real” sandalwood products still only makes up about 5,000 tonnes of this raw material. There is still good opportunities for plantation sandalwood with good heartwood and reasonable santalol levels in the future.
India still has the ban on importing sandalwood. Recently it may decided to allow the importation license of sandalwood but only to be processed in free trade zones and all of the product must then be exported. This will probably be for oil extraction and then they will send the oil to the Middle East. The Indians are now allowed private growing of album plantations, and there is about 200 hectares planted up to the beginning of this year. There is one large consumer of album sandalwood oil in India that is planting, and they intend to plant 400 hectares per annum. They are probably the largest consumer of sandalwood oil in the world. They are being realistic and will not even consider harvesting any of this sandalwood until after 35 years plus.