Producers say newsprint crisis due to low prices

Producers say newsprint crisis due to low prices

JAKARTA (JP): Newsprint producers, facing public criticism
over current supply shortages, are saying the problems are the
result of prices being too low.

"The cause for the current paper crisis lies in the low price
factor," Kusmadi, president of state-owned paper company PT
Kertas Leces, said at a hearing between the Association of
Indonesian Pulp and Paper Producers and the Manufacturing and
Energy Commission of the House of Representatives here yesterday.

He said his company was suffering loses because it sells its
newsprint at Rp 1,700 (76.4 U.S. cents) a kilo -- the price
recently agreed by newsprint producers and newspapers publishers.

When asked by legislators, the association's executives
preliminarily refused to disclose the costs of newsprint
production. However, on the insistence of a number of legislators
who threatened to postpone the hearing, Kusmadi said that his
company's production costs were estimated to be Rp 2,320 a kilo,
of which raw materials contributed the largest portion, about 80
percent of the cost.

Agreeing with Kusmadi's, Lee Won Je, president of PT Aspex
Paper, the country's other newsprint producer, said his company
is actually subsidizing domestic newspaper publishers because it
sells its products at prices below its production costs.

However, Lee declined to disclose his company's production
costs in detail, saying only that "for sure, our production cost
is lower than Leces' but higher than the current newsprint
price."

He said recently that his company's production costs stood at
about Rp 2,300 a kilo.

Aspex and Leces are the country's only newsprint producers.
Aspex's annual production capacity stands at 190,000 tons, while
Leces' capacity is only 65,000 tons. Leces, which also produces
high-quality paper, has reduced its newsprint production capacity
because of the low sale price of the product.

Indonesia's newspaper publishers need 12,000 tons of newsprint
per month, of which Aspex supplies 10,500 tons and Leces supplies
the rest.

Lee said yesterday that there are actually three other paper
companies which can produce newsprint: PT Gede Karang, PT Setia
Kawan and PT Suparma. "However, because of the low newsprint
price, they don't want to produce such paper."

Adjustment

Meanwhile, Minister of Information Harmoko told journalists
after meeting with President Soeharto at the Merdeka Palace here
yesterday that the domestic price of newsprint should follow
international market developments.

"The domestic newsprint price must be adjusted with
international prices because the prices of raw materials keep
increasing," Harmoko said. "When the prices of the raw materials
decrease, newsprint prices will decrease as well."

According to the Association of Indonesian Pulp and Paper
Producers, the price of imported newsprint, which is not subject
to any import duty, is about US$1,000 per ton or Rp 2,340 per
kilo, well above the domestic newsprint price of Rp 1,700 per
kilo.

The two newsprint producers import almost 100 percent of their
raw materials -- waste paper and long-fiber pulp -- whose
international prices are soaring.

The association said waste paper currently sells at US$410 a
ton, compared with $110 early last year, while long fiber-pulp
sells at $1,100 a ton, compared with $400 early last year.

Indonesia is projected to import 1.01 million tons of waste
paper this year, increasing 47 percent from last year's 687,000
tons. Of this projected imports of waste paper, Aspex will import
250,000 tons and Leces 108,000 tons.

Minister of Industry Tunky Ariwibowo said yesterday that the
current crisis of newsprint supply is affecting only small
newspaper publishers, whose total demand accounts for less than
20 percent of the total domestic need for newsprint.

"They do not buy newsprint directly from producers but,
instead, they buy newsprint from agents which might be fishing in
the troubled water," Tunky said.

The minister called on newsprint producers to "discipline"
their agents if they found them to be hoarding newsprint.

Responding to Tunky's call, Lee acknowledged that a number of
agents might be hoarding newsprint as they expect that the
newsprint price will increase next month.

The Association of Newspaper Publishers is expected to submit
proposals to the industry minister next week on ways of supplying
newsprint from producers to newspaper publishers and on the price
of newsprint.

Later this month, newspaper publishers and newsprint producers
will meet to negotiate on the price of newsprint. The current
price of Rp 1,700 applies only until the end of this month. (rid)