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Riaupulp, Indah Kiat slash pulp, paper output
Two of Indonesia's giant pulp and paper manufacturers, which together make up 63 percent of domestic pulp production, have significantly cut their outputs, following a recent trend of major cut backs by Indonesian manufacturers
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Two of Indonesia's giant pulp and paper manufacturers, which together make up 63 percent of domestic pulp production, have significantly cut their outputs, following a recent trend of major cut backs by Indonesian manufacturers.
PT Riau Andalan Pulp and Paper (Riaupulp) and PT Indah Kiat Pulp and Paper have taken the decision amid a weakening global market exacerbated by a prolonged scarcity of raw materials, Industry Minister Fahmi Idris said Thursday.
"They were facing a raw material shortage. And the global financial meltdown, which affects the demand of developed countries, has exacerbated the situation," Fahmi said.
Riaupulp has been operating at one-thirds capacity since last week, when it announced it would fire 1,000 workers and temporarily dismiss 1,000 others.
Riaupulp director Rudi Fajar said during the announcement that the company had taken a number of measures to increase efficiency to offset a drop in production and rising production costs before resorting to laying off workers, including cutting back on fuel, electricity and water usage and business trips.
Indah Kiat, Fahmi said, had cut its output by around 20 percent.
According to Fahmi, the company's production cuts have caused the total output of the pulp and paper industry to drop to below 50 percent of capacity, having previously been running at 70 percent of capacity.
In 2007, the industry was operating at an average output of 80 to 90 percent of capacity.
Before the cuts, Riaupulp and Indah Kiat together produced 4.2 million tons of pulp per year, or 63 percent of the 6.7 million tons produced annually by the national industry.
Every year, the industry rakes in around US$5 billion in exports.
Indah Kiat corporate secretary Yan Partawijaya said the company had cut production by 10 to 20 percent in line with what he said was the company's annual overhaul program.
He said the company normally produced 2.7 million tons of paper per year.
"We have been conducting an overhaul since October that will last until the end of January next year, while the global market is slowing down.
"In the meantime, no workers have been dismissed, or temporarily laid off. That will be the last thing we resort to," he said.
Mohammad Mansyur, who is the chairman of the Indonesian Pulp and Paper Association, has said the industry would face tough challenges because of the global economic downturn, which came at a time when the price of pulp was already declining.
He said the global price of pulp had declined to $600 a ton from $950 a ton mid this year, while global paper prices had slid to $750 a ton from $1,100 a ton mid this year.
