Paper producer plans to raise prices

Indra Harsaputra, The Jakarta Post, Surabaya

Paper producer PT Kertas Leces plans to increase the price of paper by 5 percent to help cope with the rising production costs, in line with the rising trend in the price of natural gas.

The price of natural gas has risen by about 11 percent since the start of the year, forcing the state-owned paper producer to spend an extra Rp 12 billion (US$1.3 million) per month to cover production costs, Kertas Leces president director Robert Simanjuntak told The Jakarta Post.

"To cover production costs, we will raise the paper price by 5 percent as early as March," he said on the sidelines of a ceremony that marked the change of the company's logo in Surabaya.

Nevertheless, Robert remained upbeat that the price hike would do little damage to the company's sales performance. In fact, he said the firm had targeted a production increase of 10,000 tons this year, from about 152,000 tons in output the year before.

The company also plans to boost its export to 50 percent of its total production this year, from 35 percent in 2004. Hong Kong, New Zealand and Australia are the company's traditional overseas buyers.

In anticipation of a possible shortage of natural gas, Robert said the company was planning also to use coal as an alternative fuel source.

Negotiations were underway with a coal producer from China to follow up the plan, he added.

Meanwhile, nation-wide, paper production is in for a steady growth of 5 to 5.5 percent annually.

The ministry of industry predicted that pulp production -- main raw material for paper -- will reach 6.955 million tons by 2009, while paper output up to 10.376 million tons. Pulp output in 2004 stood at 5.3 million tons, while paper at 7.41 million tons.

"Per capita paper consumption is also increasing in Indonesia, from 25.5 kilograms in 2003 to 25.10 kilograms last year," the ministry's director for forest products Aryan Wargadalam said.

Kevin McElhatton, chairman of the Pulp and Paper Product Council, also shared a positive outlook on Asian pulp and paper industry, citing the decreasing level of production in North America -- a world's traditional stronghold for pulp and paper producer.

He further said that Indonesia had the opportunity to play a dominant role in the international pulp and paper market in the coming year.