APKI says RI pulp prices bottoming out

APKI says RI pulp prices bottoming out

SINGAPORE (Dow Jones): Indonesian pulp prices have bottomed out, with further recovery expected in the fourth quarter, the Indonesian Pulp & Paper Association told Dow Jones Newswires Tuesday.

"Pulp prices have already hit rock bottom," Muhammad Mansur, chairman of the association said, quoting Indonesian hardwood pulp at a low of $330 a metric ton "several weeks ago."

"Now it is around $380/ton, and we're expecting prices in the fourth quarter to rise up to $400/ton-$420/ton," he said.

In January, Indonesian premium pulp was quoted around $460/ton.

Major Indonesian producer Asia Pacific Resources International Holding, a member of the association, declined to specify whether it would increase pulp prices.

Thai producers Advance Agro PCL and Phoenix Pulp & Paper PCL are expected to raise prices by $10-$20/ton as early as next month.

Acknowledging that the abundance of Brazilian pulp is a threat to the Indonesian product, Mansur said the freight costs of Brazilian pulp are relatively higher.

"Brazilian pulp is a threat, of course, but we're ready to compete with them," Mansur said.

Asked whether paper producers will be hurt by a pulp price increase, he said paper prices will also rise, albeit at a slower rate.

He said printing and writing paper was quoted around $600/ton two weeks ago, but declined to detail any increase in paper prices.

Despite the recovery in pulp prices, Indonesian pulp producers prefer to reduce exports, and instead supply pulp output to domestic paper mills, because paper products fetch better prices, Mansur said.

The Sinar Mas group, which controls debt-ridden Asian Pulp & Paper Co., has already set the trend by channeling most of its pulp output to its own paper mills.

APRIL is also doing the same thing, but on a much smaller scale, Mansur said. Both APP and APRIL are Indonesia's biggest producers.

As a result, Indonesia's 2001 pulp exports are expected to rise slightly to 1.5 million tons, from 1.3 million tons last year, Mansur said. The small export rise is mostly due to a 12.2% output increase to 4.6 million tons, he said.

Domestic demand for pulp will rise to 4 million tons this year, from 3.5 million tons last year, he said.

Paper exports will grow at a higher rate, according to Mansur, to reach 3.7 million tons this year, from 3.1 million tons last year.

Mansur wouldn't elaborate on the industry's view of the new cabinet led by President Megawati Soekarnoputri, saying only: "We are very happy with the composition of the cabinet."

Indonesia is the world's ninth largest pulp producer, with an annual capacity of 6.3 million tons.