Toll Manufacturing Opportunity for Sri Lanka
Presented by Ceylon Timber Depot Pty Limited in partnership with the State Timber Corporation (“STC”)
Toll manufacturing of timber decking for the Australian market
Toll manufacturing – In a toll manufacturing agreement a company provides its raw materials to a third party service provider. The third party service provider who often has specialized equipmentor infrastructure provides a subset of manufacturing processes on behalf of the company using those materials.
Product – Australian Timber Decking
Timber decking in Australia is a widely used product in the construction of commercial and residential buildings and outdoor spaces. There is an established client base (retailers, architects etc.) ready to purchase between AUD 800,000 per month, April to September and between AUD 1,200,000 per month between October to March of Forest Stewardship Certified (FSC) Eucalyptus decking. This is not a new market however a replacement for product currently being manufactured in Indonesia and China. To maintain longevity and relevance in the market the product and the manufacturing must be FSC certified. The manufacturing process must have FSC chain of custody certification.The supply of logs is available for 15 to 18 years, subject to prior sale. After that time it is important that Sri Lankan grown logs are able to meet the ongoing demand. Proposal for FSC certified plantation to be discussed at a later date based on the successful commencement of toll manufacturing.
FSC certification ensures that products come from well managed forests that provide environmental, social and economic benefits. Chain of custody certification applies to manufacturers, processors and traders of FSC certified forest products. It verifies FSC certified forest products along the production chain. At each stage in the chain of processing and transformation, chain of custody certification is needed to confirm that FSC certified wood products are kept separate from uncertified products, or mixed in approved ways.
Summary of process
– Importation and clearance of logs from FSC certified plantation in SouthAfrica
– Delivery of logs to State Timber Corporation Facility
– Saw logs into boards
– Preservative treat boards which have sapwood
– Kiln dry boards
– Skip dress and colour match [3 colours] and gradeand defect dock boards
– Dress boards with a pencil round corner profile
– Repair any voids and cracks and spray stain sapwood to match colour
– Pack, label and re-export to Australia
Toll Manufacturing Benefits for Sri Lanka
– Chain of CustodyFSC certification allows timber products manufactured at the State Timber Corporation to be globally accepted allowing entry into world markets that only accept FSC timber products
– State Timber Corporation becomes a vital part in the supply chain for Australian Hardwood Decking
– Inward flow of foreign currency
– Substantial domestic employment opportunities
– Awareness created for Sri Lanka as a destination for Toll Manufacturing competing with the likes of China, Indonesia and Vietnam making Sri Lanka a hub for timber industry based value addition.
Benefits to Sri Lanka – A long term perspective
The world supply of timber is becoming increasingly scarce. The demand for timber by developed industrial economies is many times greater per capita than underdeveloped countries. Moving forward countries will either have to import timber or grow it. If grown domestically and with other things being equal, it is a significantly lower cost as handling and transport are not added. Through commencing successful toll manufacturing of FSC certified timber products and the investing in FSC certified
plantations the vision for Sri Lanka is to create an exportable surplus and develop the domestic skills and infrastructure to be able to make the highest value added products maximising available exportable timber as well as provide for domestic demand.