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Indonesia’s Pulp & Paper Industry: Trends, Risks, Opportunities

Indonesia’s Pulp & Paper Industry: Trends, Risks, Opportunities. Christopher Barr Woods & Wayside International 21 October 2010. Indonesia’s pulp & paper sector. Rapid expansion since early-1990s 2010 BHKP capacity = 7.1 million Adt /yr 2009 BHKP production = 5.97 million tonnes

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Indonesia’s Pulp & Paper Industry: Trends, Risks, Opportunities

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  1. Indonesia’s Pulp & Paper Industry:Trends, Risks, Opportunities Christopher Barr Woods & Wayside International 21 October 2010

  2. Indonesia’s pulp & paper sector Rapid expansion since early-1990s 2010 BHKP capacity = 7.1 million Adt/yr 2009 BHKP production = 5.97 million tonnes → export volume = 2.6 m tonnes (2008) → export value = US$ 1.4 bn (2008) 2009 paper and paperboard production = 9.36 million tonnes → export volume = 3.1 m tonnes (2008) → export value = US$ 2.7 bn (2008)

  3. Major pulp mills in Indonesia

  4. APP/SinarMas Group • Pulp Capacity: • Indah Kiat (Riau) = 2.3 Adt/yr • Lontar Papyrus (Jambi) = 800,000 Adt/yr Integrated with pulp and paper production in Indonesia and China 35 plantation concessions cover 2.3 m hectares in Riau, Jambi, S. Sumatra, W. and E. Kalimantan

  5. APRIL/RGE Group (formerly RGM) • Pulp Capacity: • RAPP (Riau) = 2.9 Adt/yr • Toba Pulp (N. Sumatra) = 200,000 Adt/yr Integrated with pulp and paper production in Indonesia and China 28 plantation concessions cover 1.2 m hectares in Riau, N. Sumatra, and E. Kalimantan

  6. Heavy investments in Acacia plantations

  7. … but significant sustainability risks • Conversion of natural forests • High carbon emissions • Conflicts with local people

  8. Conversion of natural forests

  9. High carbon emissions, esp. on peat

  10. Tenure conflicts with communities

  11. Growing pressure to respond to sustainability concerns … • NGO campaigns • Buyers seeking responsible sources • Climate change --Norway-Indonesia LOI

  12. But capacity expansion is also underway Ministry of Forestry’s promoting US$ 15 bn of investment in new capacity by 2020: • Pulp capacity to 16.0 m tonnes/yr • Paper and board capacity to 18.5 m tonnes/yr • 9.0 million hectares of plantation concessions already allocated for conversion Key point: If pulp capacity expands to 16 million tonnes/yr, annual wood demand will grow from 29 m m3/yr to 72 m m3/yr

  13. Many new mill projects are ‘planned’… not all will be built Source: Verchot et al. (CIFOR 2010)

  14. APP and APRIL expansion in China • APP Hainan mill has 1.2 m Adt/yr of BHKP • APP now building new mill with 2 APMP lines in Guangxi • APRIL Rizhao has 1.3 m Adt/yr • Both APP and APRIL import wood chips from Indonesia to fill fiber shortages in China

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