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)