Producers may cut newsprint prices

JAKARTA (JP): Newsprint producers agreed yesterday to sell their products to newspaper publishers at average rates of their export prices, possibly reducing newsprint prices by almost 20 percent.

The Association of Indonesian Pulp and Paper (APKI) and the Association of Indonesian Newspaper Publishers (SPS) signed the agreement yesterday which set the price of newsprint, which is sold in U.S. dollars, at the average free-on-board (FOB) export prices.

The deal will be effective for the next three months.

"This is a win-win solution for both parties," Minister of Trade and Industry Rahardi Ramelan, who also signed the agreement, told reporters yesterday.

The agreement states that negotiating parties will use the newsprint company's average FOB rate of the previous month.

APKI's secretary-general, Kahar Haryopuspito, said the country's largest newsprint producer, PT Aspex Paper, currently exports its product to the United States at the FOB price of $410, Australia at $480 and Malaysia at around $475.

The agreement also states that negotiating parties will use the average dollar-rupiah exchange rates of a week before the purchase.

SPS chairman Leo Batubara said yesterday the use of the agreement would allow a cut in the newsprint prices by as much as 20 percent from the current price, set at $505 per ton in March.

"If the FOB price is $410 per ton, it would be Rp 6,175 per kilogram in rupiah or a 20 percent drop from Rp 7,610 per kilogram currently," Leo said.

The two associations agreed in May to set the newsprint price at $505 per metric ton when the rupiah was about 8,500 to the American dollar.

The rupiah has since plunged to about 14,000.

Rahardi said the new deal would nullify the government's earlier offer to subsidize cash-strapped newspapers and magazines by waiving the 15 percent value-added tax on newsprint.

"For now, there will be no tax waivering because this deal has been agreed upon."

Increasing prices of newsprint has continued to burden local newspaper publishers, which began drastic cost-cutting measures late last year.

Newsprint material and recycled papers are mostly imported because of the lack of supply in the country.

Leo said only 9 percent, or 900 tons, a month of the old newspapers in the country were sold back to the newsprint producers, compared to domestic demand of 11,000 tons per month.

Gatherers of old newspapers were reluctant to sell the papers to the producers because the companies only paid them Rp 500 per kilogram, Leo said.

Meanwhile, producers import recycled papers at Rp 1,600 per kilogram, he added.

Kahar said the total production capacity of the country's seven newsprint producers reached 643,400 tons in a year.

Aspex made up 430,000 tons of the amount, PT Kertas Leces 90,000, PT Suparma 30,000, PT Setia Kawan 7,000, PT Gede Karang 50,400 and PT Adi Prima 36,000, he said.

Kahar said domestic consumption of newsprint had dropped to about 120,000 tons a year from about 200,000 tons before the crisis. (das)