PAPUA New Guinea has secured what could be described as the “best price” arrangement in decades for round logs export with an overseas firm.
Forest Minister Walter D. Schnaubelt revealed a State Purchase Option (SPO) has been recently conducted between the Papua New Guinea Forest Authority (PNGFA) and a Chinese firm, Great Zone Holdings Limited in Shanghai.
SPO is one of the provisions under the timber licence that the State through PNGFA is given 25% of total logs harvested annually by a timber company, the option to engage in a sale and purchase of round logs. PNGFA in this arrangement is able to engage in open market internationally and independently to test and obtain the best price for PNG tropical round logs.
There ha\ie been significant achievements through the auspices of SPO, which started in 2007 and managed by the Timber Marketing Branch at PNGFA. The increased FOB price for SPO goods will now set a new benchmark for normal cargoes onwards, and secure long term arrangements for SPO Log Buyers to promote strong markets for PNG forest products and primary produce at arms length and in a transparent manner, and taking a competitive advantage against other tropical and temperate forest producers and exporters.
“I’m pleased to announce a significant milestone achievement by the Marape-Basil government.
Our recent SPO agreement signed with Great Zone Holdings Limited has offered to purchase 7,984 cubic metres of round logs of varying species totalling US$1.2m (K4.Inn) an average increase of about US$65 (K230) per cubic metre more than the existing price agreed to in recent times. This increment, which excludes ie\lies and royalties, translates to a Duty Tax gain of K282m per annum which also represents an increase of about 60% of tax revenue gained for GoPNG in the forest sector.
“Despite the negative perception of the forest sector and this Government in recent events, it is the Marape/Basil government foresight focusing on “Take Back PNG” policy that has persevered in enhancing best price for PNG resources. PNGFA is no different in this instance.”
The elated Minister commend the SPO department for facilitating this successful outcome and encourage them to continue to put PNG’s interest first when negotiating on our behalf.
The minister also thanked Sentawan (PNG) Limited for releasing its first SPO cargo upon written advise by PNGFA and he strongly recommend all timber companies to comply with the same arrangements in the coming months.
He is calling on logging firms to stick to the latest SPO price discovery when submitting their Export Endorsement Price applications to PNGFA.
‘All timber companies are expected to observe these changes and apply gains per species of all round logs exported accordingly,” he said.
As Minster responsible for signing all export permits, Schnaubelt said he is expecting no more than 10% variance per cubic metre on all Export Endorsement Price application submitted to PNGFA based on current market prices.
If the recorded gains are less than 10% in comparison then expect your applications to be returned until price adjustment per cubic metre is satisfactory.
“It’s also my view to work towards achieving 60% (avg 2million cubic metres per year) of round logs to have processed onshore by 2025 and 40% of round logs exported then must remit 100% of sales proceeds back onshore.’
He also announced the current SPO price attained for tropical round logs for highly sought species. This includes among others: Kwila (KWI) at US$340 (K1,202)/cubic previously $240 per cubic; Taun (TAU) US$198 (K70O)/cubic previously $96/cubic; and Calophyllum (CAL) US$196 (K693)/cubic previously $80/cubic etc…. these prices per cubic metres is one of the “best price’ since Independence thanks to PNGFA and Marape/Basil government s “Take Back PNG” policy.