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/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

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