Western Australia is poised to become the world’s biggest producer of sandalwood, as native supply from traditionally strong suppliers in Asia diminishes and global demand strengthens.
Western Australia is poised to become the world’s biggest producer of sandalwood, as native supply from traditionally strong suppliers in Asia diminishes and global demand strengthens.
The state’s Forrest Products Commission is expecting a harvest of 2,000 tonnes of native Western Australian sandalwood this year, predominantly from in the northern Goldfields region.
About 70 per cent of this year’s harvest will be premium greenwood, which can fetch anywhere between $7,000 and $8,000 per tonne for an average piece, and up to $12,000/t for the premium parts of the tree.
The most common end use for sandalwood is for the extraction of sandalwood oil, which is contained in many of the world’s leading fragrances, and also has significant cultural and religious significance across Asia.
FPC sandalwood division spokesman Grant Pronk said that, although this year’s harvest was “fairly average”, the price of the WA sandalwood continued to climb on decreasing global supply.
Production in traditional sandalwood growing regions, including India and Indonesia, has fallen significantly in recent years as a result of poachers and illegal smuggling.
This is particularly the case for the highly prized Indian sandalwood, with current auction values between $135,000 and $140,000 a tonne.
“People who were traditionally using Indian sandalwood are now demanding and putting more pressure on WA sandalwood to be delivered. So that bumps up the price,” Mr Pronk said.
Although there is legislation in WA on the maximum amount of natural resource sandalwood trees permitted to be harvested in one year, WA is still in a prime position to meet the increasing global demand.
“The demand is large and it’s growing. There certainly is a turn towards WA product,” Mr Pronk said.
“And having a stable government and the right conditions for growing sandalwood, and plenty of marketing expertise, WA has a real potential to be a very strong player in the world’s sandalwood market.”
Perth-based TFS Corporation, which manages the largest area of Indian sandalwood plantation in the world, has recorded a net profit growth of 25 per cent in 2006, driven by an increase in MIS sales.
The company, which holds an 840-hectare plantation in the Kununurra region, has signed a conditional contract to buy the Kingston Rest property, which offers at least 1,900 further hectares suitable for sandalwood plantation.
TFS chief executive officer Tom Cullity said the company was well positioned to be the world’s premier supplier of Indian sandalwood due to the reliability of its supply, and the company’s ethical growing and extraction techniques.
“The fine fragrance houses in Europe are particularly concerned that they don’t get stolen wood or smuggled oil because they’re sensitive to ethical concerns. And when you’ve got brand names that have been around for a very long time, they can’t afford to take a risk,” Mr Cullity said.
With most of the state’s WA and Indian sandalwood plantations likely to come online in six years, the industry expects prices to flatten as supply becomes more reliable.
But Mr Cullity believes prices will still be very robust, forecasting a minimum rise of 5 per cent per year, and will provide very good returns for investors.
