Riau Andalan's pulp production surging in 1996

JAKARTA (JP): PT Riau Andalan Pulp and Paper said yesterday its pulp production will most likely reach 625,000 tons this year, as compared to 320,000 tons in 1995.

A company spokesman, Anwar Hanafie, said that Riau Andalan now produces 1,800 tons of pulp a day, making its total annual output some 625,000 tons by the end of the year.

"With this level of production, we have not yet reached our full capacity," Anwar told The Jakarta Post. "We will run at full capacity in 1997 or 1998."

Riau Andalan's pulp plant in Kampar, Riau province, has the capacity to produce 750,000 tons of pulp per annum. It began production of pulp in February last year, with an output of 1,200 tons a day. By the end of last year, its daily output increased to 1,700 tons.

Anwar said 80 percent of Riau Andalan's pulp output is exported to countries in Southeast Asia, East Asia and South Asia as well as a number of European countries, and the remaining 20 percent is sold to domestic paper plants.

Riau Andalan is 99 percent owned by Asia Pacific Resources International Holdings Ltd. (APRIL), which is controlled by Sukanto Tanoto, chairman of the widely-diversified Raja Garuda Mas Group. APRIL, which has an administrative office in Singapore, is listed on the New York Stock Exchange.

Sukanto said in London earlier this week that his pulp company will still manage to give returns to investors as he believed that world hardwood pulp prices would not fall under the lowest cost producer's cash cost level as happened in the previous market cycles.

"Personally, I don't believe prices will go below the (lowest cost producer's) cash cost -- below $300," Sukanto was quoted by Reuters as telling a conference in London.

APRIL claims to be the world's lowest cost pulp producer, having a cash cost of about $250 per ton, finance director Berry Kwock told the conference.

Anwar noted that when the company's paper division, PT Kampar Andalan Kencana, starts its commercial production late next year, some of its pulp output will go to its paper mill, which is located near the pulp plant.

Kampar Andalan started construction of the US$630 million paper plant earlier this year. After the completion of the paper plant, Riau Andalan will become an integrated pulp and paper company.

In the first year of operation, Anwar said Kapar Andalan's paper mill will have an initial production capacity of 300,000 tons of cultural paper per annum, which will be expanded to 600,000 tons in the second year.

The president of Kampar Andalan, Polar Yanto Tanoto, said recently that the company expects to export 70 percent of its production to earn about $500 million per annum in revenues.

The value of Indonesia's exports of paper and paper products rose by 50.67 percent to $1.01 billion last year from $671 million in 1994. Meanwhile, the value of the country's exports of processed woods, including pulp, increased by 11.42 percent to $1.07 billion from $964.5 million. (rid)