Indonesia's methanol industry to enter real competition<\/p>\n
by Johannes Simbolon<\/p>\n
JAKARTA (JP): Indonesia's methanol industry will enter tight
\ncompetition when the Humpuss Group's PT Kaltim Methanol Industry
\nopens its methanol plant in Bontang, East Kalimantan, by the end
\nof the year.<\/p>\n
The start-up of the US$350 million plant will not only put an
\nend to the importation of methanol but also cause an oversupply
\nof methanol on the domestic market, pushing the country's
\nmethanol industry into tight competition.<\/p>\n
The construction of the plant -- which Kaltim Methanol
\npresident Abdul Wahab sees as a possible new flagship of the
\nHumpuss Group -- was completed last month, several weeks ahead of
\nschedule, and it is now under the commissioning stage.<\/p>\n
Kaltim Methanol is 70 percent owned by the Humpuss Group,
\nwhich is controlled by President Soeharto's youngest son Hutomo
\nMandala Putra, and 30 percent by Japanese trading house Nissho
\nIwai.<\/p>\n
The country's other methanol producer is PT Medco Methanol
\nBunyu, a subsidiary of the Medco Group.<\/p>\n
Medco Methanol manages and operates the country's first
\nmethanol plant on the island of Bunyu, East Kalimantan, which is
\nowned by state-owned oil and gas company Pertamina.<\/p>\n
Medco Methanol took over the plant's operation and management
\nfrom Pertamina last April after years of production problems.<\/p>\n
According to their contract, Medco Methanol is entrusted to
\noperate the plant for 20 years, while Pertamina will receive a
\nfixed amount of fees and a share of the plant's revenue.<\/p>\n
Since production started in 1986, Pertamina was only able to
\nproduce about 50 percent of the plant's designed capacity of
\n330,000 tons of methanol a year due to shortages of natural gas
\nsupplies on the island.<\/p>\n
Medco Methanol now pipes natural gas to Bunyu from its gas
\nfield on the island of Tarakan, about 35 kilometers southwest of
\nBunyu.<\/p>\n
The company spent $30 million laying pipes and building other
\nrelated infrastructure to supply gas to the Bunyu plant from
\nTarakan.<\/p>\n
Medco Methanol has allocated a further $20 million to revamp
\nthe 14-year-old plant to increase production to its designed
\ncapacity of 330,000 tons per annum for another 20 years. The
\nupgrading will start next year.<\/p>\n
Both Wahab and Medco Methanol president Robby J. Rompis said
\nonce Kaltim Methanol's plant came on stream, the domestic supply
\nof methanol would increase to between 560,000 tons and 580,000
\ntons a year, much higher than the domestic demand of about
\n400,000 tons a year.<\/p>\n
That would make an oversupply of between 160,000 and 180,000
\ntons a year, they said.<\/p>\n
Kaltim Methanol's plant is designed to produce up to 660,000
\ntons of methanol a year.<\/p>\n
To tackle deal with the oversupply, Wahab said, the company
\nwould sell only 40 percent of its methanol domestically. Nissho
\nIwai would market the remaining 60 percent overseas.<\/p>\n
Rompis said Medco Methanol had managed to raise the production
\nof the Bunyu plant to between 930 tons and 950 tons a day or
\nbetween 300,000 and 320,000 tons annually.<\/p>\n
But with the oversupply, which company will sell the most
\nmethanol?<\/p>\n
Wahab believes Kaltim Methanol has a better chance to surge
\nahead in the competition since distribution of its product will
\nbe handled by a sister company, Humpuss Trading.<\/p>\n
Humpuss Trading, Wahab said, had vast experience in
\ndistributing methanol across the country and had developed a wide
\nmarketing network.<\/p>\n
Humpuss Trading monopolized the distribution of methanol from
\nPertamina's Bunyu plant until Medco Methanol stepped in and
\ndismantled Humpuss Trading's monopoly.<\/p>\n
\"I believe our former costumers will be loyal to us. It's like
\ntwo men, old and young, competing for a girl. I believe girls
\nalways choose the young one,\" said Wahab referring to Kaltim
\nMethanol's new methanol plant<\/p>\n
Medco Methanol, meanwhile, is not interested in marketing its
\nmethanol itself but prefers to focus on production.<\/p>\n
\"We sell the methanol on the spot. Any company wanting to buy
\nmethanol is welcomed at the plant,\" Rompis said.<\/p>\n
According to Rompis, there are six companies acting as
\ndistributors for Medco Methanol's products, including Humpuss
\nTrading, Aifta Dirga Jasa and Multi Impressa.<\/p>\n
Both Wahab and Rompis promised not to wage a price war, saying
\ntheir methanol would be sold at the international price.<\/p>\n
To win and to lose is, however, the order of the day in
\nbusiness. Kaltim Methanol and Medco Methanol are well aware of
\nthis and have been thinking of solutions.<\/p>\n
One solution is to increase absorption on the domestic market.<\/p>\n
Methanol is traditionally used for the making of
\nformaldehyde, acetic acid, cleaning agents, solvents, methyl
\ntertiary butyl ether, clean fuel (especially in Brazil) and
\nothers. The growth of these industries in the country influences
\ndomestic methanol consumption.<\/p>\n
According to Rompis, between 70 percent and 80 percent of
\nmethanol in the country is absorbed by formaldehyde producers to
\nmake glue for plywood. Therefore, methanol demand in the country
\ndepends heavily on the growth of the country's plywood industry.<\/p>\n
Government data say methanol consumption grew by 2 percent per
\nyear domestically. But Rompis doubted this, saying consumption
\nseemed to be at a standstill and the plywood industry was
\nstagnating.<\/p>\n
The Association of Indonesian Wood Panel Producers hoped to
\nincrease the country's plywood production to 10 million cubic
\nmeters this year from 9.57 million cubic meters last year.<\/p>\n
But the association later revised its 1997 target to 9.6
\nmillion cubic meters, only a negligible increase from last year's
\nproduction.<\/p>\n
Rompis did not expect that demand for acetic acid, cleaning
\nagents, solvents and methyl tertiary butyl ether would grow in
\nthe foreseeable future to absorb the surplus in the country's
\nmethanol output.<\/p>\n
\"The only solution to the oversupply situation is exporting
\nour methanol,\" he said.<\/p>\n
Meanwhile Wahab was rather optimistic about the domestic
\nmarket's potential.<\/p>\n
He believed the absorption of methanol on the domestic market
\nwould grow as a consequence of the oversupply. He predicted the
\nacetic acid business would grow to be the second largest methanol
\nbuyer in the country after the formaldehyde business.<\/p>\n
He said so far there was only one acetic acid producer in the
\ncountry.<\/p>\n
Data from the Ministry of Industry and Trade data show that
\nIndonesia's imports of acetic acid grow by an average of 17
\npercent per annum, with 1996 imports reaching 26,357.8 tons.<\/p>\n
Still, Wahab said the only solution to methanol oversupply in
\nthe foreseeable future was exporting the commodity, for which
\nKaltim Methanol was well prepared with Nissho Iwai.<\/p>\n
\"Nissho Iwai has prepared a methanol tanker with a capacity of
\n30,000 tons to carry our methanol from Bontang Port to export
\nmarkets,\" Wahab said.<\/p>\n
Rompis, meanwhile, said Medco Methanol would barely face any
\nproblems in selling its methanol abroad as several companies from
\nJapan, Malaysia and Taiwan had offered to sign long-term purchase
\ncontracts with it. Each wanted to buy up to 200,000 tons of
\nmethanol a year.<\/p>\n
\"We, however, have so far rejected the offers due to
\nconsideration for domestic consumers,\" Rompis said<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/indonesias-methanol-industry-to-enter-real-competition-1447893297",
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