Indonesia

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Indonesias Pulp Paper IndustryTrends, Risks,
Opportunities

• Christopher Barr
• Woods Wayside International
• 21 October 2010

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Indonesias 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)

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Major pulp mills in Indonesia
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APP/Sinar Mas 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
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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
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Heavy investments in Acacia plantations
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but significant sustainability risks

• Conversion of natural forests
• High carbon emissions
• Conflicts with local people

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Conversion of natural forests
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High carbon emissions, esp. on peat
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Tenure conflicts with communities
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Growing pressure to respond to sustainability
concerns

• NGO campaigns
• Buyers seeking responsible sources
• Climate change --Norway-Indonesia LOI

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But capacity expansion is also underway

• Ministry of Forestrys 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
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Many new mill projects are planned not all
will be built
Source Verchot et al. (CIFOR 2010)
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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