Timber should be part of the commodity run up in the last two years, unfotunately the housing slump in US and slow housing start in Japan abruptly ended the party towards the end of 2007.

Just look at the fact, timber is limited resources. There are only so many trees that can be cut down and the new ones take a whole new human generation to grow. So, in case the world economy does not fall into a steep and prolonged recession, growing demand will eventually outpace the limited supply of timber products.

Timber companies in Malaysia are in a wonderful position of being the direct producers of raw materials, like plantation companies. And unlike the steel sectors and many so-called oil & gas players, which are merely raw material processors or service providers to the raw materials producers. In the great bull run on commodities prices, only direct raw material producers will enjoy the greatest benefits.

If you believe in the commodity boom, and if you believe in the rise of China and India and many of the emerging markets for many years to come, timber is a very attrative asset class to be had for the long term, and it is so much better to have it when it is at the bottom.

and...

My Dearest Raymond,

Yes, I do understand the reasoning why some folks WANT to bullish on this sector.

1. It's the WORST performing commodity asset.

2. It has a wonderful fundamental issue to sell - limited resources.

However, as you had pointed out in your very first paragraph...

"unfotunately the housing slump in US and slow housing start in Japan abruptly ended the party towards the end of 2007...."

That's the main issue.

That's the very main issue why I am not convinced at all.

Without the demand for the product, how will the sellers jack up the price????

And most of all, without the BOOMING demand of a BOOMING housing market, then I am afreaid the chances are there will never be a TRULY BOOMING market for the timber sector.

You know every booming market will have its laggard or ignored asset. It happens. And I am afraid timber could be the one this time around.

Look at two of the main timber players. Ta Ann and WTK. They had given the vote of confidence in this sector by diversifying into the palm oil sector too. If these big boys are not convinced, why should I be convinced either?

and

Actually, it's interesting to compare timber with oil, as prompted by raymond above.

1. It's true timber takes 20-30 years to grow new and replace. But what about oil? 2 billion years to grow and replace? :-) I would say oil is a lot harder to replace than timber, once consumed.

2. Yes, higher timber prices benefit direct producers more since their profit margins are geared. But I wouldn't write off the Oil & Gas players off so quickly, particularly those that are involved in E&P. Since one is comparing long term, imagine a world when more and more oil is consumed. Already, global consumption outstrips supply ("peak oil"). If exploration activities stops, how long will existing stocks & reserves lasts? What will happen to this world when globally, there is insufficient oil? I shudder to think of it, because it is almost certain we will see ridiculously higher levels that will make $120 looks very cheap in comparison. If there is a global shortage, countries will certainly go to war to control oil for their own consumption. The world then may look more like Mad Max than what we know today. So, it's clear that Exploration activities can never stop. The world cannot afford such a scenario to eventuate. It must pursue alternative energy sources as well, but that has its own political problems. I think Raymond may be underestimating the potential impact of global oil shortage on the Oil and Gas industry.

3. On the other hand, if there is timber shortage, somehow, I don't think countries will bother going to war for it. Alternative building materials already exist in abundance.

Of course, this is extremely long term view, and I personally don't invest based on such super-long term considerations. (Some might disagree with me and argue that this might happen sooner and within my lifetime).

Seng.