The sandalwood story

History

Sandalwood is a global commodity with an extraordinary history.

The fragrant wood of the sandalwood tree came to prominence in Asia over 4,000 years ago and developed a central place in many societies and religions throughout the world. Sandalwood in its many forms has been fiercely traded ever since, and is now a fragrance that is used and recognised almost universally.

Australian sandalwood was 'discovered' by new arrivals to Western Australia in the 1840s. It was soon being harvested and exported to the Far East to augment the supply of other sandalwood species, and became invaluable to the expanding colony. Remarkably, sandalwood has been exported from Western Australia almost continuously ever since.

Product

The wood of Australian sandalwood - Santalum spicatum, is today an established global commodity sourced exclusively from Western Australia. A source of unique essential oils, resins, powders and even carving blanks, it is sought after for a myriad of personal care, cosmetic, cultural and religious purposes in many countries including Europe, the United Arab Emirates, India and China. In fact an extraordinary diversity of products is derived from Australian sandalwood, with a mix of both new and traditional applications of wood, oil and resin, ranging from insect repellents to fine fragrances that are being manufactured in over 15 different countries.

The heartwood of Australian sandalwood contains concentrations of a complex and fragrant essential oil - as well as resins. Currently around 2,000 tonne of wood is processed annually for export, with around 30% of this wood subjected to a steam distillation process to separate around 14 tonne of these valuable extractives from the wood. All the spent, residual wood is then further treated and exported.

Australian sandalwood oil is the most complex of all the sandalwood species, containing over 130 chemical compounds, some of which exhibit strong anti-microbial and anti-inflammatory activity. The large nut of this species also contains a unique oil. These attributes have prompted ongoing research into additional market opportunities associated with both new cosmetic, therapeutic and pharmaceutical applications.

Market

As with all other commercial sandalwood species, Australia's native sandalwood resource has been unsustainably exploited and is significantly depleted. However, while the supplies of Indian and other sandalwood species has collapsed in recent years, regulation of the resource in Western Australia is currently providing continuity of supply, enabling existing markets to be maintained and providing a foundation for future market expansion.

The strong demand and supply fundamentals for Australian sandalwood are reflected by price trends, with new highs being achieved even in the current economic climate. This appetite for Australian sandalwood is highlighted by the robust demand that exists for even the poorest grades of wood, including branch-wood down to 15 mm in diameter. The essential oil associated with the higher quality wood is becoming an essential ingredient in the perfume and fine fragrance industry, with the best quality oil fetching as much as $1,000 AUD per litre.

Australia has taken the initiative and responded with significant investment in plantations of both the Australian and Indian sandalwood species. Australian sources of sandalwood will increasingly dominate global supply and ultimately set prices in the international market. No other country has embarked on a program of sandalwood establishment of any significance and, for a number of reasons, none is likely to do so in the near future (The Government of Western Australia, Sandalwood Industry Development Plan 2008).

While the yield and quality of product sourced from plantations of Indian sandalwood being grown under irrigation in WA's remote tropical north is largely untested, research has demonstrated that the Australian sandalwood product being grown much closer to existing processing facilities will achieve oil yields and quality that will meet industry and market expectations.

Sourcing Indian sandalwood oil is often problematic for buyers, with uncertain supply channels and often prohibitive prices. It is deemed by some in the perfume industry to be too risky to include as an ingredient in new product formulations.