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1. ADHESIVE RESIN INDUSTRY ATTRACTING FEW NEW INVESTORS DUE TO POOR PERFORMANCE OF PLYWOOD INDUSTRY.

Adhesive/formaldehyde resin (thermosetting adhesive) industry is attracting less interest from new investors as evident from the approval given by Coordinating Board of Investment BKPM in 1995, which numbered only three new investors and three expansion projects. The little interest for new investment in this industry is due to the sluggish performance of plywood industry which is the biggest consumer of adhesive resin. In the last six years (1991-1996) annual plywood production increased by only 2.2% and a 13% decrease in 1994.

Thermosetting adhesive industry began to grow in keeping with the growth of plywood industry. These plants are scattered in various regions, especially in centers of plywood industry. Until now, there are 32 thermosetting adhesive manufacturers, of which 16 are located in Kalimantan and 8 in Sumatera. The rest is scattered in Java, Maluku and Irian Jaya. Of these manufacturers, 25 are integrated with plywood industry and other wood-based industry.

Until 1995, Indonesia's adhesive/formaldehyde resin production capacity was 1.8 million tons a year. The biggest plant was PT Gelora Citra Kimia which was Capable of producing 124,000 tons of formaldehyde resin a year. This PMDN company is located in Barita Kuala, South Kalimantan. Among foreign companies, the biggest was PT Duta Pertiwi Nusantara which was located in Ponti-anak, West Kalimantan, capable of producing 75,000 tons of formaldehyde resin a year.

Table - 1

Adhesive/Formaldehyde Resin Production by Manufacturer
 (Tons/year)

Manufacturer Location Status

- Arjuna Utam Surabaya, PMA
 Kimia, PT East Java
- Austral Byna, Banjarmasin, PMDN
 PT South Kalimantan
- Batu Penggal Samarinda, PMDN
 Chemical East Kalimantan
 Industry, PT
- Benua Multi Potianak, PMDN
 Lestari, PT West Kalimantan
 Binajaya Barito Kuala, PMDN
- Rodakarya, PT South Kalimantan
- Cakram Utama Tenggarong, PMDN
 Jaya, PT East Kalimantan
- Dover Chemical, Serang, PMA
 PT West Java
- Duta Pertiwi Pontianak, PMA
 Nusantara, PT West Kalimantan
- Dyno Mugi Langsa, PMA
 Indonesia, PT East Aceh
- Gelora Citra Barito Kuala, PMDN
 Kimia, PT South Kalimantan
- Giat Ultra Barito Kuala, PMDN
 Chemical South Kalimantan
 Industrial, PT
- Intan Wijaya Banjarmasin, PMDN
 Chemical, PT South Kalimantan
- Kayu Lapis Kendal, PMDN
 Indonesia, PT Central Java
- Korindo Abadi, Tanjung Pinang, PMA
 PT
- Korindo Ariabima Pangkalan Bun, PMA
 Sari, PT Central Kalimantan
- Kurnia Kapuas Pontianak, PMDN
 Utama Glue West Kalimantan
 Industries, PT
- Lakosta Indah, Samarinda, PMDN
 PT Eat Kalimantan
- Pamolite Probolinggo, PMD
 Adhesive East Java
 Industry, PT
- Perawang Pekanbaru, PMDN
 Perkasa Riau
 Industri, PT
- Raja Garuda Besitang Langkat, PMDN
 Mas Glue, PT North Sumatera
- Sabak Indah, PT Muara Sabak, PMDN
 Jambi
- Susel Prima, PT Palembang, PMDN
 Permai, PT South Sumatera

- Superin, PT Medan, PMDN
 North Sumatera
- Tecwin Jaya Balikpapan, PMDN
 Development, PT East Kalimantan
- Wiranusa Pulau Mangole, PMDN
 Trisatrya, PT Ambon, Maluku
Others

Total formaldehyde resin formaldehyde resin

 (Tons/year)

Manufacturer Type of Product Capacity

- Arjuna Utam - UF, PF, UMF, PB 37,000
 Kimia, PT - Latex based adhesive 2,000
 - Hardener 1,540
- Austral Byna, - UF, PF 20,000
 PT
- Batu Penggal - UF, PF 36,000
 Chemical 36,000
 Industry, PT
- Benua Multi - UF, PF 95,000
 Lestari, PT
 Binajaya - Melamine formaldehyde 9,000
- Rodakarya, PT - UF, PF 44,000
- Cakram Utama - UF, PF 60,000
 Jaya, PT
- Dover Chemical, - Formaldehyde resin 40,000
 PT - Latex & Synthetic 12,000
 resin disp
- Duta Pertiwi - UF, PF, UMF, PB 75,000
 Nusantara, PT
- Dyno Mugi - UF, PF 31,000
 Indonesia, PT
- Gelora Citra - UF, PF, MF 124,000
 Kimia, PT
- Giat Ultra - Phenol formaldehyde 40,000
 Chemical
 Industrial, PT
- Intan Wijaya - Formaldehyde resin 60,000
 Chemical, PT (UFR, MFR, PFR, LFE)
- Kayu Lapis - Formaldehyde resin 28,000
 Indonesia, PT
- Korindo Abadi, - Urea resin 7,000
 PT - Phenol/Melamine 4,000
- Korindo Ariabima - Fromaldehyde resin 24,000
 Sari, PT
- Kurnia Kapuas - Formaldehyde resin 54,000
 Utama Glue
 Industries, PT
- Lakosta Indah, - UF, MF, PF 40,000
 PT - Hardener 1,278
- Pamolite - Formaldehyde resin 72,000
 Adhesive
 Industry, PT
- Perawang - UF Particle board 7,500
 Perkasa - UF, MF, PF 69,000
 Industri, PT
- Raja Garuda - UF, PF, MF 41,250
 Mas Glue, PT
- Sabak Indah, PT - UF, PF 60,000
- Susel Prima, PT - UF liquid 25,000
 Permai, PT - UF powder 10,000
 - PF 14,000
- Superin, PT - Formaldehyde & 48,000
 Formaldehyde resin
- Tecwin Jaya - Formaldehyde resin 20,000
 Development, PT
- Wiranusa - Resin (UF, PF, MF) 106,000
 Trisatrya, PT
Others 446,136

Total formaldehyde resin formaldehyde resin 1,799,704



Note:

- UF (urea formaldehyde)

- PF (phenol formaldehyde);

- MF (melamine formaldehyde);

PMDN = Domestic Investment

PMA = Foreign Investment

Source: Department of Industry and Trade/Data Consult

One new formaldehyde resin project

Since 1995 to July 1997, BKPM issued only one approval for a new project in adhesive/formaldehyde resin industry, and one new project for producing its feedstock (formaldehyde). The new project which is scheduled to operate this year is PT Wahana Catur Mas located in Jambi. It cost Rp 85 billion investment to produce 75,000 tons of formaldehyde resin a year and 60,000 tons of formaldehyde a year. Another new project which will produce 21,000 tons of formaldehyde a year is PT Mambarami Kimia at Yapen, Irian Jaya, with Rp 18.19 billion investment.

Expansion projects will be carried out by PT Intan Wijaya Chemical, PT Pamolite Adhesive Industri and PT Gelora Citra Kimia Abadi. Viewed from its production realization, the utilization of capacity by these three companies has been full-capacity that they needed new machines. Of the three expansion projects, the largest will be made by Gelora Citra Kimia Abadi with Rp 8 billion investment that by increasing 75,000 tons of formaldehyde resin to its production capacity its total capacity will be 199,000 tons, thus asserting its position as the country's largest manufacturer in the country.

Table - 2

New Investment in Formaldehyde and Adhesive/Formaldehyde Resin Approved by BKPM, 1995 - July 1997
 Production
 capacity
Name of company Location Status (tons/year)

New projects:
-Wahana Catur Jambi, PMDN UF 42,000
 Mas, PT Jambi PF 26,000
 MF 7,500
 Fd 60,000
-Mamberamo Kimia Yapen, PMDN Fd 21,000
 Industri, PT Irian Jaya

Expansion projects:
-Intan Wijaya Banjarmasin, PMDN UF powder
 Chemical South 6,600
 Industry, PT Kalimantan
-Pamolite Adhesive Probolinggo, PMA UF/PF/NF
 Industry, PT East Java 25,704
 Formalin
 18,000
-Gelora Citra Kimia Barito Kuala, PMDN UF 36,000
 Abadi, PT South PF 6,000
 Kalimantan HF 10,000
 Fd 36,000

 Investment License/ Commencement
 commitment definite of
Name of company (Rp'mill.) BKPM operation

New projects:
-Wahana Catur 85,000 1995 1997
 Mas, PT

-Mamberamo Kimia 18,192 1996 1999
 Industri, PT

Expansion projects:
-Intan Vijaya 6,619 1995 1997
 Chemical
 Industry, PT
-Pamolite Adhesive
 Industry, PT US$ 1.7 mill. 1995 1998

-Gelora Citra Kimia 8,000 1995 1998
 Abadi, PT



Note: - Fd (formaldehyde)/basic material;

Source: BKPM = Investment Coordinating Board/Data Consult;

PMDN = Investment Coordinating Board

PMA = Foreign Investment

Average production growth 8.5%

Although plywood industry tends to slow down, thermosetting adhesive production grew fairly well. At least in the last six years (1991-1996), the average growth rate was 8.5% due to the growth of wood panel industry like particle board and block board industries, etc, which consume more adhesive resin per cubic meter than ordinary plywood. Consumption by wood panel industry has contributed the growth in consumption of such adhesive.

Table - 3

Thermosetting Adhesive Production in Indonesia
 Volume Change
Year ('000 tons) (%)

1991 837.7 -
1992 975.6 16.5
1993 1,024.4 5.0
1994 1,009.4 -1.4
1995 1,132.0 12.1
1996(*) 1,248.0 10.2



(*) Tentative figures

Source: AIFTA/Department of Industry and Trade/Data Consult

Capacity utilization 62.9%

Based on production capacity and realization in 1995, utilization of capacity of thermosetting adhesive production reached 62.9%. Some large manufacturers were operating in full capacity, like PT Arjuna Utama Kimia, PT Kayu Lapis Indonesia, PT Intan Wijaya Chemical, PT Gelora Citra Kimia, PT Pamolite Adhesive Industry, PT Susel Prima Permai, PT Superin and PT Tecwin Jaya Development. But many manufacturers were not operating efficiently, PT Benua Lestari which had 95,000 tons capacity a year; its realized production amounted only to 20,586 tons, which means, its utilization was only 21.7%.

Table - 4

Adhesive Resin Production by Manufacturer and Estimated Utilization of Capacity, 1995
 Production Capacity
 (tons) utilization
Producers (%)

Arjuna Utama Kimia, PT 32,387 87.5
Austral Byna, PT 9,009 45.0
Batu Penggal Chemical Industry, PT 26,000 72.2
Benua Multi Lestari, PT 20,586 21.7
Binajaya Rodakarya, PT 35,079 66.2
Cakram Utama Jaya, PT 22,000 36.6
Dover Chemical, PT 24,552 61.4
Duta Pertiwi Nusantara, PT 47,305 63.1
Dyno Mugi Indonesia, PT 18,977 61.2
Gelora Citra Kimia, PT 88,227 71.2
Giat Ultra Chemical Industrial, PT 28,000 70.0
Intan Wijaya Chemical, PT 51,099 85.2
Kayu Lapis Indonesia, PT 29,914 106.8
Korindo Abadi, PT 7,000 63.6
Korindo Ariabima Sari, PT 16,000 66.6
Kurnia Kapuas Utama, PT 50,157 92.9
Lakosta Indah, PT 27,000 67.5
Palmolite Adhesive Industry, PT 65,000 90.2
Perawang Perkasa Industri, PT 53,000 69.3
Raja Garuda Mas Glue, PT 25,320 61.4
Sabak Indah, PT 36,000 60.0
Susel Prima Permai, PT 46,168 94.3
Superin, PT 40,430 84.2
Tecwin Jaya Developement, PT 19,150 95.8
Wiranusa Trisatrya, PT 44,413 41.9
Lain-lain 269,227 60.3

Total 1,132,000 62.9



Source: Department of Industry and Trade/Data Consult

Plywood industry absorbs 615,000 tons of adhesive

Although plywood production in the last six years grew only by 2.4% a year, consumption of thermosetting adhesive for plywood remained high. It was estimated that in 1996 plywood industry absorbed approximately 615,000 tons, which was down 10.3% from that of the previous year's 686,000 tons. One ton thermosetting adhesive is used to produce 13.3 cubic meters of plywood.

Table - 5

Plywood Production and Estimated Consumption Thermosetting Adhesive, 1991 - 1996
 Production of Consumption of
 plywood ([M.sup.3]) thermosetting
 adhesive
Year ('000 tone)

1991 9,124,600 686.1
1992 9,023,000 678.4
1993 9,206,700 692.2
1994 8,006,400(*) 602.0
1995 9,122,401(*) 686.0
1996 8,178,655 614.9



(*) Data corrected

Note: Excluding adhesive for decorative playwood and particle board

Source: Apkindo/Department of Forestry/Data Consult3
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Comment:1. ADHESIVE RESIN INDUSTRY ATTRACTING FEW NEW INVESTORS DUE TO POOR PERFORMANCE OF PLYWOOD INDUSTRY.
Publication:Indonesian Commercial Newsletter
Geographic Code:9INDO
Date:Sep 8, 1997
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