Consortium to build new rayon plant in Sumatra
Consortium to build new rayon plant in Sumatra
JAKARTA (JP): A consortium of eight textile companies has
agreed to build a US$720 million rayon production plant in
southern Sumatra to help reduce costs in the textile industry,
which has recently been hit by rising raw materials prices.
Bambang R. Soegomo, chairman of the Indonesian Textile
Association (API), was quoted on Saturday by press reports as
saying that raw materials for textile production are currently
provided by only three companies in the country: PT Indo Bharat
Rayon, PT Inti Indo Rayon and PT South Pacific Viscose, which
together have a production capacity of 225,000 tons of rayon per
year.
Soegomo, who was speaking during a visit to a textile plant
operated by the Kanindotex Group in Semarang, Central Java,
declined to name the eight association members which have agreed
to participate in the rayon plant project, but he said that
Kanindotex will be one of them.
He said the plant is expected to have a production capacity of
180,000 tons per year.
Rayon, which is made from pulp, is one of the main raw
materials used in textile production. Indonesia, which needs
about 210,000 tons of pulp per year, still imports pulp.
According to the Republika daily, PT Inti Indo Rayon plans to
start producing pulp suitable for rayon manufacture in 1997.
In the January-June period, rayon prices in Indonesia
increased by more than 30 percent, forcing textile manufacturers
to cut production. Some observers have laid the blame on cartel-
like practices on the port of rayon producers. Apart from rayon,
other raw materials used by the textile industry, such as
chemical and cotton fiber, also saw price increases of up to 75
percent.
Soegomo said that the $720 million investment required for the
rayon plant did not include the expenses needed to establish
industrial timber estates to supply raw materials.
He said that if the establishment of timber estates were taken
account of, the total investment involved would probably be twice
as high.
The plant will require between 150,000 and 200,000 hectares of
industrial timber estates.
Credibility
President Soeharto's second son Bambang Trihatmodjo, a
shareholder in the Kanindotex Group, said that the eight textile
companies which had made a commitment to establishing the plant
"all have high credibility and will therefore have no trouble
obtaining investment funds".
"Banks have trust in these companies so it will not be
difficult (for them) to look for loans," Soegomo said, as quoted
by the Kompas newspaper.
He said the consortium expected the plant to provide a steady
supply of rayon to its downstream businesses.
"For the same purpose, the consortium also plans to build a
pulp factory, which is at a higher upstream level than the rayon
plant," he said.
Bambang said that until the consortium has established its own
pulp plant and industrial timber estates -- which need between
seven and eight years to mature -- the planned rayon plant would
obtain raw materials from China, Australia and the United States.
The Kanindotex Group, which was previously owned by former
convict Robby Tjahjadi, was taken over by the government last
year after it defaulted on loan repayments to the state-owned
Bank Pembangunan Indonesia (Bapindo) and Bank Bumi Daya. The
group, which has three companies, was later acquired by
businessmen Johannes Kotjo and Bambang.
Benny Soetrisno, the president of the Kanindotex group, said
the group intends to expand its production capacity by adding
150,000 spinning units its current total of 420,000 units.
He said the Kanindotex Group would need Rp 172 billion for the
expansion.
The new spinning units will, he said, be used to increase the
production of denim fabrics from 750 million meters per year to
1.4 billion meters. (pwn)