Indonesia pulp industry expects recovery this year

JAKARTA (JP): The Indonesian pulp industry, which experienced a slump last year, expects a recovery this year as pulp prices show an increasing trend on the world market, the Indonesian Pulp and Paper Association said Friday.

Association chairman Muhammad Mansur said international pulp prices were climbing above the 1996 level of US$400 a ton, and were projected to reach between $500 and $550 by the end of 1997.

The prices were expected to further climb above $600 in 1998, he said.

"The price hikes will positively impact the Indonesian pulp industry," Mansur was quoted by Antara as saying.

"Import duties for pulp now range up to 20 percent. Most countries don't apply duties on pulp," he added.

Mansur said with such import duties, Indonesia pulp industries could export pulp at competitive prices and sell it on the domestic market at lower prices than imported pulp.

Indonesia's pulp and paper exports dropped 4.4 percent to $1.3 billion in 1996 because of low prices on the world market.

Pulp prices dropped to $400 a ton in 1996 from $900 a ton several years earlier.

Pulp and paper was the only sector among the country's leading export commodities to drop in export growth that year.

Observers said that current pulp price hikes were more from the decrease in production by some leading producing countries, like the United States, than from the increase in pulp demand on the world market.

"It must be kept in mind that these price hikes are based on the curtailing of production. Although there will be a temporary shortage of pulp, there is no boom in sight for pulp demand," a Finnish observer was quoted by Reuters as saying recently.

Mansur called on Indonesian pulp industries to use the current price hikes as an opportunity to increase competitiveness against main producing countries.

He said northern countries, like the U.S., Canada, China, Sweden, Norway and Finland, control 85 percent of the market with a combined production capacity of 180 million tons per year, or 62 percent of the world's total output.

Indonesian pulp production capacity reached 3.1 million tons in 1996 and was expected to grow to 4.4 million tons this year.

Mansur believed Indonesia would be able to compete against main producing countries.

He said pulp producers in those countries were facing difficulties in finding raw material, while producers in Indonesia were soon to harvest "industrial forest estates".

The cost to produce pulp using raw material from industrial forest estates was lower than using raw material from natural forests, he added.

Ministry of Forestry data says 13 companies have established -- or were in the process of establishing -- pulpwood estates which now cover 805,354 hectares of land.

The government has allocated 2.625 million hectares to these companies for pulpwood estates.

Mansur said forest estates could be harvested in six to seven years.

Some companies had started harvesting their forest estates, but big harvests were projected to occur in ten to 15 years.

"At that time, Indonesia's pulp output will reach ten million tons a year," he said. (jsk)