Pulp & Paper Industry in Indonesia: Expand on Rising Demand from China
The pulp and paper industry in Indonesia is expected to expand five percent in 2015 on rising paper consumption in Asia and particularly in China, the world’s second-largest economy. Rising consumption will lead to an intensifying of global competition in the pulp and paper industry. Global pulp demand is forecast to rise 2.6 percent per year to 38.9 million tons by 2025 from 24.5 million tons in 2010. Over the same period, pulp demand in China is estimated to grow 6.4 percent per year to 14.3 million tons by 2025.
Rusli Tan, Deputy Chairman of the Indonesia Pulp and Paper Association (APKI), said that growing pulp and paper consumption in Asia is important for the global industry as consumption of these products has been declining in North America and Europe where computers and mobile devices have increasingly succeeded in replacing paper products. Tan added that the Indonesian government must support the domestic pulp and paper industry in order to safeguard a competitive industry as well as to increase domestic production capacity in order to uphold the current market share in the Asian region. He also said that enhanced infrastructure development is key to raise performance of the nation’s pulp and paper industry. Therefore, he puts his trust in Joko Widodo, the soon-to-be president of Indonesia, who emphasized during his campaiging that infrastructure development is required in order to reach +7 percentage point economic growth. According to Tan, improved infrastructure in Southeast Asia’s largest economy could make the pulp and paper industry grow by 20 percent in 2016 as it leads to a decline of logistics costs and thus higher purchasing power (which will also positively affect the pulp and paper industry).
Total paper production in Indonesia stood at six million tons in 2013. Almost half of this total paper output was produced by Riau Andalan Pulp and Paper (RAPP). In 2014, Indonesia’s total paper output may reach eight million tons mainly on increased production of Sinar Mas which opened a new pulp and paper factory in Palembang (Sumatra) earlier this year.
Kusnan Rahmin, President Director at RAPP, said that the company has to cope with slower pulp and paper demand in 2014 due to an oversupply of paper last year amid sluggish global demand. The company exports approximately 70 percent of total production (the remainder being sold to the domestic market).
It should also be mentioned that the pulp and paper industry has often been targeted by environmentalist groups for the clearing of rainforests and draining of peat-lands which has become a large source of greenhouse gas (GHG) emissions that cause climate change. After the USA and China, Indonesia is reportedly the third-largest emitter of GHG’s. The global pulp and paper industry is also a major source of water pollution and landfill waste.
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