Overseas sale of abaca to slow

published December 16, 2008 in BusinessWorld

TACLOBAN — The country’s abaca exports will slow next year, as dampened economic activity worldwide hits demand for this item, Jeffrey Espeña, regional director of the Fiber Industry Development Authority (FIDA), said in a recent interview here.

"The real impact of global economic downturn will be felt next year, because many companies have already placed purchase orders [this year]," Mr. Espeña said.

Expecting harder times ahead, FIDA has been asking local governments to be ready to provide alternative means of livelihood to affected farmers.

Eastern Visayas is one of the country’s top abaca-producing regions, accounting for some 40% of national production. At least 31,100 hectares in the region are devoted to abaca production.

Eastern Visayas sold 29,162 bales (or 125 kilograms) of abaca fiber in the 11 months to last November to Japan, United States, Canada and United Kingdom, FIDA data show.

Japan, which purchased 66% of the total abaca fiber sales from the region, remained the top importer, with average purchases of nearly 5,000 MT annually.

Still, Joselina Elle, FIDA’s Eastern Visayas information officer, said the industry should be able to ride out the crunch since abaca fiber has many uses. Abaca is processed into capacitor paper, insulation paper, tea bag, masking tape, stencil paper, filter oil, absorbent paper casings and other specialty paper products, she noted.

"Even if there’s recession, people will still buy it to supply the requirements of many manufacturers. Another advantage is that many countries have started to shift to indigenous materials such as abaca fiber," Ms. Elle said in a separate interview.

She added that FIDA is looking at expanding to other markets like China, South Korea, and Taiwan in order to diversify from the recession-hit economies of Japan, the US and Europe. The targeted alternative East Asian markets have been buying raw fiber from the Philippines, but their shares in total shipments have been minimal, Ms. Elle said.

But at least one local trading firm has noted what could be the start of a slowdown in abaca export shipments.

Hermogenes Torrefranca, branch manager of Baybay, Leyte-based abaca buyer Chingbee Trading, an affiliate of Specialty Pulp Mills, Inc. , said his company used to ship out 10 container vans of raw fiber to Japan. That volume was cut to just three containers last month.

"We might cut the buying price but we won’t stop [doing] business to sustain the local demand," Mr. Torrefranca said in a recent phone interview.

Mr. Torrefranca said the price of low-grade abaca fiber dropped to P30 per kilogram this month from P58/kg last October.

"The buying price... went down starting November as top importers reduced their demand for raw fiber. It’s been weak. We have no choice but to bring down the price," Mr. Torrefranca said in a phone interview.

High-grade fiber still sells for P71/kg, but the Chingbee executive said only few farmers produce such fiber due to prohibitive processing costs. (Sarwell Q. Meniano)