Pulp producers to raise prices next September

Pulp producers to raise prices next September

JAKARTA (JP): An industry executive warned yesterday that
paper prices are very likely to rise in the coming months because
the world's major pulp producers intend to raise their prices in
September.

A director of publicly-listed PT Pabrik Kertas Tjiwi Kimia,
Suresh Kilam, told reporters yesterday that a number of the
world's leading pulp producers in North America and Scandinavia
have announced that they will increase their prices of short-
fiber pulp by US$75 per ton, to $940 per ton, in September.

He said the increase in the price of pulp, a raw material in
paper production, would automatically influence the price of
paper.

"It's possible that the price of paper will increase in line
with the rise in the pulp price," Suresh said after an annual
meeting of Tjiwi Kimia's shareholders.

He said short-fiber pulp currently sells for $865 per ton to
regular buyers, while spot buyers have to pay $940 per ton.
Meanwhile, the current international prices of long-fiber pulp
stand at $940 for regular buyers and $1,050 for spot buyers.

Indonesia, which aims to become one of the world's leading
pulp exporters, currently produces some 2.1 million tons of
short-fiber pulp, of which 900,000 tons are exported.

However, Indonesia is still a net importer of long-fiber pulp,
which is used for the production of newsprint, in addition to
waste paper.

"We are trying to become regular buyers of long-fiber pulp so
that we can get cheaper prices because we will remain a net
importer of long-fiber pulp for many years to come," Suresh said.

Promising

He suggested that the Indonesian government encourage private
investors to enter the pulp industry because, he said, the sector
promises a better market, thanks to the high international prices
of pulp and the steady demand for the material.

Worldwide demand for pulp stands at 32 million tons per annum,
while only about 31.1 million tons is produced each year. "So,
currently there is a shortage of 900,000 tons of pulp a year on
the world market," Suresh said.

He said if Indonesia could earmark five percent of its total
forests as industrial forests which would supply logs for pulp
mills, Indonesia would be a major player on the international
pulp market.

"Let's assume that our forests cover a total area of 140
million hectares, and we use five percent of them, especially the
destroyed forests, for industrial timber estates. Then we would
already have seven million hectares of industrial timber estates
capable of producing 21 million tons of pulp each year," Suresh
said.

The ministry of forestry, which had limited the issuance of
permits for industrial timber plantations to only 13
concessionaires for environmental reasons, said last month that
it would resume issuing licenses for the establishment of
industrial forests in order to boost the country's pulp
production.

Industry analysts have said that the local pulp industry faces
a serious shortage of wood materials because it is no longer
allowed to fell trees from natural forests.

Speaking on the results of yesterday's shareholders' meeting,
Yudi Setiawan Lin, president of Tjiwi Kimia, said the company's
net profit for this year was projected to be more than Rp 150
billion (US$67.26 million), as compared with Rp 50.79 billion
last year.

The 1994 figure included a one-time accounting charge of Rp
70.3 billion for derivatives losses incurred last year.
Majority shareholders made voluntary equity contributions to
cover those losses.

Yudi said Tjiwi Kimia posted a net profit of Rp 85 billion
during the first half of this year, unchanged from the same
period of last year.

The meeting approved the company's plan to distribute cash
dividends of Rp 60 per share, one stock dividend for each five
existing shares and four bonus shares for each five existing
shares.

Tjiwi Kimia, a member of the Sinar Mas Group, conducted its
first initial public offering on the Jakarta Stock Exchange in
1990. Public shares currently represent 26.8 percent of the
company's total shares.

Publicly-listed PT Indah Kiat Pulp & Paper, another member of
the Sinar Mas Group, also conducted its annual shareholders'
meeting yesterday. However, the company's management avoided
meeting with the press for reasons that are not currently known.

Indah Kiat, which produces 1.2 million tons of short-fiber
pulp annually, reported a net profit of Rp 146.92 billion last
year, up 63 percent from Rp 90.04 billion in 1993. (rid)