Pulp producers' closure expected to push up prices

Pulp producers' closure expected to push up prices

JAKARTA (JP): Pulp prices, which have been dropping since
October, are likely to recover when 20 pulp manufacturers in the
northern hemisphere close down later this year as expected, an
executive says.

Timber baron Mohamad (Bob) Hasan said yesterday he was
confident there will be many marketing opportunities for pulp
because consumption in developing countries, including Indonesia,
is currently less than 10 kilograms per capita per year, far
below that of Japan and North American and European countries,
which consume 200 kg per capita per year.

He pointed to the highly competitive nature of Indonesia,
where the raw materials for pulp factories come from fast growing
tree species which can be harvested after seven or eight years,
as opposed to the 40 years required by species grown in the
boreal and temperate forests of subtropical regions.

Manufacturing costs in Indonesia, as low as US$250 per ton,
are also more competitive when compared with the $550 to $600 per
ton required in most developed pulp-manufacturing countries, Bob
said.

"With costs as low as this, we can compete with anyone," he
said.

Analysts predicted earlier this year that Indonesian pulp and
paper companies would suffer profit declines due to dropping
prices on the world market and an oversupply of up to three
million tons.

In February, pulp prices on the international market declined
to $875 per ton since peaking at $1,000 last October for Northern
Bleached Softwood Kraft, the benchmark for pulp pricing.

Loan

Bob signed a syndicated loan yesterday for the construction of
pulp manufacturing plant PT Kiani Kertas in the East Kalimantan
village of Mangkajang in Berau regency.

Kiani Kertas was awarded a syndicated loan worth US$410
million.

The arranger of the syndicated loan was Bank Negara Indonesia
1946, while Bank Dagang Negara and Bank Umum Nasional were co-
arrangers.

Other syndication members were Bank Danamon, Bank
Internasional Indonesia, Bank Tabungan Negara, Bank Universal,
Bank Central Asia, Bank Duta, Bank Umum Koperasi Indonesia, Bank
PDFCI, Bank Niaga, Bank Panin, Bank BDNI and Bank Rama.

Bob, who is the company's chief commissioner, said the loan
will be part of the company's total investment of $930 million.
The remaining $520 million will be self-financed.

The 3,400-hectare factory, which will have a production
capacity of 1,500 tons a day, or 500,000 tons a year, is expected
to start production in early 1997.

According to Bob, Kiani Kertas has obtained a license to
export its products and has met the environmental requirements
stipulated by the minister of environment.

Raw materials for Kiani Kertas will come from its 180,000
hectares of pulpwood plantation in East Kalimantan.

Bob said that most of the pulp will be exported. "But if it is
needed, we will also sell about 10 percent to the domestic
market," he added. (pwn)

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