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)