INDONESIA (From The Jakarta Post) -- Indonesia's second-largest pulp and paper firm PT Riau Andalan Pulp and Paper (RAPP) has completed its third paper mill and set its operational debut for next year to increase production and expand its exports to the international market.

The Rp 4 trillion (US$300.7 million) new mill will increase its paper production capacity by 250,000 tons, or 30 percent, to 1.1 billion tons per annum.

Today, the company's two paper mills in Pangkalan Kerinci, Riau, run at 95 percent capacity, producing 850,000 tons of paper. The third mill is expected to also run at 95 percent next year.

"We have already received orders in the new mill from several clients. Xerox [American-based office equipment provider] is one of them, under long-term purchase contracts," RAPP spokesperson Budhi Firmansyah said during a site visit on Tuesday.

RAPP finishing manager Wahyu Setiady said the three mills produced approximately 14,000 tons of paper rolls monthly, sold at $350 per ton, 60,000 tons of cut-size (A4, A5, etc) priced at $800/ton and 15,000 tons of folio (giant cut-size) at $600/ton.

The firm also produces 2.8 million tons of pulp a year, 70 percent of which is exported to more than 20 countries. Two thirds of the remaining 30 percent is internally absorbed to manufacture its own paper products.

RAPP currently enjoys a superb efficiency from its integrated business. It operates acacia and eucalyptus plantations to supply raw materials, while powering all of the production sites and employee lodges in a 1,750 ha complex in Pangkalan Kerinci, Riau, from its coal-fired and biomass-fueled power plants, which have a total electricity capacity of 535 megawatts (MW).

Its parent group, Royal Golden Eagle (RGE), a Singapore based conglomerate owned by Indonesian tycoon Sukanto Tanoto, is building a textile fiber factory, of which pulp is the raw material, next to the pulp and paper mills in the complex. The fiber factory is expected to be up and running in 2018.

The company claims to have implemented a zero burning policy since 1994. However, its supplier, PT Sumatera Riang Lestari, was named a suspect for failing to prevent fires in 2015. Early this year, the Riau police halted their probe into the case.

Indonesian Pulp and Paper Association (APKI) vice chairman Rusli Tan lauded RAPP expansion as the export-oriented firm had been contributing a notable trade value and capital inflow to help strengthen the state foreign currency reserve.

A business expansion amid a weak paper price and sluggish industry growth, he argued, was a very strategic decision with long-term benefits. "In this kind of situation, it's good to expand because construction costs are lower. But when the economy picks up and the paper price recovers, the company will enjoy an extra benefit," he said.

The association had previously predicted that the pulp and paper industry would only grow by 2 to 3 percent this year due to global economic slowdown.

With RAPP and other major players, such as Sinar Mas conglomerate, running new factories next year, Indonesia will produce at least 15 million tons of paper in 2017, a 25 percent increase from 12 million tons this year.

The current 12 million tons of national production accounts for 2.2 percent of the world's 350 million tons of annual paper production, making Indonesia the twelfth biggest paper producer. Indonesia is the ninth-biggest pulp producer in the world, producing 7 million tons a year, equal to 2.5 percent of the world pulp volume of 200 million tons.

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Join Jim Thompson on the 2nd Annual Papermakers Mission Trip to Guatemala, 22 - 29 July 17. Build houses, talk about the pulp and paper industry. For more information, email jthompson@taii.com with "Guatemala" in the subject line.