Salim Group to expand chemical business
JAKARTA (JP): PT Sulfindo Adiusaha, a chemicals subsidiary of the Salim Group, will increase its annual production capacity of caustic soda by 125 percent from its current level of 200,000 liquid metric tons (LMT), to 450,000.
"As domestic demand for this chemical product is increasing, we're going to increase production. Hopefully we can do this within 24 months," chief of the Salim Group's chemicals division Hartono Gunawan, told a press conference after a ceremony here yesterday for the signing of three business contracts worth US$107 million with Japanese and Indonesian companies.
The first contract was signed by PT Sulfindo Adiusaha with four Japanese companies -- Kobe Steel Ltd., Asahi Chemical Industry Co. Ltd., Asahi Engineering Co. Ltd., and Sumitomo Corporation -- to construct the caustic soda plant.
Caustic soda is a chemical product that is widely used in the production of pulp, paper, rayon, textiles, soap and detergent.
"For this expansion, we've already picked the technology of the Japanese company Asahi Chemical, which is used by caustic soda plants all over the world," Hartono noted.
He said the expansion will require an investment of US$56 million, which will come from Sulfindo's own equity and the funds raised from the issuance of bonds and convertible bonds on the local capital market.
Indonesia's current production of caustic soda is estimated at 500,000 LMT per year from four producers, while the local demand is about 650,000 LMT.
"As a result, Indonesia has to import some 150,000 LMT every year, mostly from Japan and the United States," he said, adding that the current price is between $400 and $500 per ton.
He said that imports are currently subject to a duty of 10 percent and a levy of 10 percent.
Hartono said that his company will import salt from Australia as raw material for its caustic soda production because locally made salt still has a quality control problem, with purity particularly affected.
"We will import about 350,000 tons of salt per year from Australia to feed our plant," he said.
The second contract was signed by PT Satomo Indovyl Polymer (SIP) -- a joint venture 50 percent owned by PT Sulfindo Adiusaha, 25 percent by Sumitomo Co. of Japan and 25 percent by Brenswick Ltd of Hong Kong -- with Japanese companies Tosoh and Sumitomo, to set up a polyvinyl chloride (PVC) plant.
PVC is used as a raw material in the production of pipes, imitation leather, shoes, cable wrapping and PVC sheets/films.
The PVC plant will have a production capacity of 70,000 tons per year and use the technology of Tosoh.
"The establishment of the PVC plant will require an investment of $42 million, of which 30 percent will be derived from our own equity and the rest from loans from a syndication of local and foreign banks," he said.
When Satomo starts operation in 1998, the Salim Group will have a total production capacity of 152,000 tons of PVC per year, as its chemical subsidiary PT Statomer already produces 82,000 tons of this product annually.
The third contract was signed by PT Satomo Indovyl Monomer (SIM) -- a joint venture 51 percent owned by PT Sulfindo Adiusaha, 25 percent by Sumitomo Corporation of Japan and 24 percent by Brenswick Ltd. of Hong Kong -- with the state-owned engineering company PT Rekayasa Industri, to develop a vinyl chloride monomer (VCM) plant.
The VCM plant will have a production capacity of 100,000 tons a year and use Elf Atochem's technology from France.
Hartono explained that the establishment of the VCM plant will require $9 million, of which 30 percent is to come from its own equity and the rest from loans provided by local banks.
By the establishment of the plants, the Salim Group will become an integrated mid-stream chemical manufacturer, producing caustic soda, EDC, VCM and PVC.
EDC is a raw material necessary for the production of VCM, which in turn needed to make PVC. (13)