Profile of Pulp and Paper Industry Development of Pulp and Paper Industry in Indonesia

4.3 Profile of Pulp and Paper Industry

Indonesia is the eleventh largest pulp and paper producer in the world with a pulp installed capacity at 7,902,100 tons and paper installed capacity of 12,895,950 tons. According to Indonesian Pulp and Paper Association APKI shown from Table 4.1, until 2010 there are 84 mills pulp and paper. Three of them were owned by state enterprises, 65 of them owned by a private company from domestic investment, and 16 companies owned by private company from foreign investment. Table 4.1 Status and Location of Installed Capacity of Pulp and Paper in Indonesia 2010 Status Location No. of Mills Installed Capacity Pulp Paper Volume tons Volume tons • State Enterprises 3 168,000 2.13 321,600 2.49 • Private Company Domestic Investment 65 3,719,100 47.06 8,751,650 67.86 • Private Company Foreign Investment 16 4,015,000 50.81 3,822,700 29.64 Total 84 7,902,100 100 12,895,950 100 • Integrated Pulp Paper 5 4,087,100 51.72 1,651,600 12.81 • Non Integrated: ‐ Paper ‐ Pulp 75 4 3,815,000 42.28 11,244,350 87.19 Total 84 7,902,100 100 12,895,950 100 • Location: ‐ Java ‐ Sumatera ‐ Kalimantan 69 14 1 148,000 7,229,100 525,000 1.87 91.48 6.64 11,159,950 1,736,000 86.54 13.46 Total 84 7,902,100 100 12,895,950 100 Source: APKI, 2012 From 84 mills in Indonesia, five companies have vertical integration between pulp mills and paper mills while 75 companies only have paper mills and four companies only have pulp mills. Most of the mills were located in Java and Sumatera. There are three main pulp and paper producers in Indonesia, Sinarmas Group, Raja Garuda Mas Group, and Barito Pasifik. Sinarmas Group is the biggest producer, with the production reach around 2.67 million tons a year, which is actually almost forty percent from total national capacity. Even with a huge scale of 84 companies, domestic demand is still cannot be accommodated.

4.4 Development of Pulp and Paper Industry in Indonesia

The Indonesian pulp industry is set to rebound from the global economic downturn by accommodating demand of international market have started to pile up with domestic pulp producers. According to Indonesian Pulp and Paper Association APKI, the current orders from foreign market is over than 2.5 million tons of pulp a year, which is more than half of annual national production capacity amounted 4.5 million tons. High numbers of demand has been helping to drive the growth of Indonesian paper and printing materials industry by achieving 10.16 percent growth in the first quarter from a quarter earlier, the fastest quarterly growth since the financial crisis in the late 1990s that reflecting a surprisingly good economic environment. According to BPS Indonesia 2010, paper production grew by 15.45 percent and 3.17 percent respectively in 2007 and 2008. The Ministry of Industry and Indonesian Pulp and Paper Association APKI, the pulp and paper are definitely included among the top 20 commodity sectors in the country. Indonesia has become the ninth largest pulp producer and the eleventh largest paper producer in the world. This industry also contributed significantly to export as well as benefiting from a robust domestic market. Paper export generated around 3,872,795 million tons and 4,246,390 million tons in 2009 and 2010, while for the pulp is around 2,244,080 million tons and 2,572,666 million tons in 2009 and 2010. Paper industry in Indonesia is a capital-intensive industry with relatively low cost of raw material prices and labors. The development of pulp and paper industry in Indonesia has been increasing from year to year, to which Indonesia has became one of the main players in the world for pulp and paper manufacturers since 2004. Paper production in Indonesia was ranked twelfth of the world, with a market share of 2.2 percent of total world production. In 2006, the capacity of the paper industry reached 10,506,180 million tons per year, while the pulp capacity reached 6,447,100 million tons per year and the waste paper capacity reached 5,602,840 million tons per year. Paper consumption also continues to increase, as this caused Indonesia only able to supply 2.5 percent of the world paper needs that reach 350 million tons per year. Paper price also increased up to US 800 per ton in 2007. The demand for waste paper has been increased due to the global warming. This situation makes a huge number of import for waste paper. The import for waste paper reached 2,412,462 million tons, while the consumption reached 6,598,464 million tons in 2010. The import of waste paper is higher than the export, which indicates that Indonesia still needs a huge amount of input due to the high number of demand for recycled paper. From Table 4.2, paper has higher value of production, export, and consumption than pulp in 2006 until 2010. In the other hand, pulp has a high number of import and utilization. This shows that a huge demand for paper not followed by an increase in the amount of raw material, which are pulp and waste paper. The increase in demand forced the pulp and paper industry to raise the production volume from year to year. The production of paper increased by 6 percent in 2007, while in 2010 increased for 15 percent. Table 4.2 The Development of Paper, Pulp, and Waste Paper in Indonesia 2006 – 2010 Description 2006 2007 2008 2009 2010 Installed Capacity MTPY: -Paper -Pulp -Waste Paper 10,506,180 6,447,100 5,602,840 11,025,080 6,483,100 5,985,700 12,178,650 7,902,100 6,351,110 12,242,950 7,902,100 6,559,018 12,895,950 7,902,100 7,751,865 Production: million tons -Paper -Pulp -Waste Paper 8,853,280 5,672,210 2,750,000 9,461,660 5,769,960 3,600,000 9,736,500 5,371,000 3,711,000 9,988,169 5,700,210 3,804,230 11,500,658 6,293,090 4,186,002 Import million tons: -Paper -Pulp -Waste Paper 290,020 922,520 2,810,670 347,620 864,160 2,161,160 424,940 1,165,500 2,700,000 443,644 1,081,350 2,284,656 497,588 1,251,202 2,412,462 Export million tons -Paper -Pulp -Waste Paper 3,540,460 2,800,680 3,823,580 2,437,380 3,810,330 2,731,730 3,872,795 2,244,080 4,246,390 2,572,666 Consumption million tons -Paper -Pulp -Waste Paper 5,602,840 3,794,050 5,560,670 5,985,700 4,196,740 5,761,160 6,351,110 3,804,770 6,411,000 6,559,018 4,537,480 6,088,886 7,751,856 4,971,626 6,598,464 Utilization Recovery Rate: -Paper -Pulp - Waste Paper 84.27 87.98 49.08 85.82 89.00 60.14 79.95 67.97 58.43 81.58 72.14 58.00 89.18 79.64 54.00 Source: APKI, 2012 Paper consumption in the world increased up to 3 percent a year. Domestic paper consumption also increased to 5.6 million tons or an average of 5 percent per year. In 2006, the consumption was 25.2 Kg per capita and in 2010 reached 32.6 kg per capita Figure 4.1. This growth is expected to be use by paper mills in Indonesia with the advantages of a shorter harvest age for inputs that is 6 to 8 years. Source: APKI, 2012 Figure 4.1 The Development of Pulp and Paper Consumption in Indonesia With 84 pulp and paper manufacturers and a total production capacity of 6.29 million tons per year, Indonesia has the ability to develop the pulp and paper industry. The main players in pulp and paper industry in Indonesia are Sinarmas Group SMG and Raja Garuda Mas Group RGM that have a large production scale and global market network. The technologies that are used by companies are based on export-oriented paper in general and promoting equivalent of modern technology with the technology in developed countries. Most of Indonesia pulp and paper mills produce more than one type of paper production and composition to follow the dynamics of the existing market. 5 10 15 20 25 30 35 2006 2007 2008 2009 2010 C o n su m p ti o n k g c a p it a Year

4.5 Profile of The Pulp and Paper Companies in Riau Province