Upcoming Asia Pulp & Paper pulp mill 'will guzzle timber'

Villagers living near the OKI mill – which will run at full capacity by around 2018 – in South Sumatra. At 2,800ha, the mill, the river and sea ports are the size of a town.
Villagers living near the OKI mill – which will run at full capacity by around 2018 – in South Sumatra. At 2,800ha, the mill, the river and sea ports are the size of a town.ST PHOTO: AZIZ HUSSIN

Singapore-based Asia Pulp & Paper is building one of the world's largest pulp mills in South Sumatra province, which it says will boost Indonesia's economy and also showcase its commitment to environmentally friendly policies. But NGOs fear the mill will lead to more deforestation and cause more fires. Assistant foreign editor David Fogarty looks at both sides of the story.

PALEMBANG (Indonesia) • About two hours by speedboat from Palembang, the capital of South Sumatra province in Indonesia, an army of workers are rushing to complete one of the world's largest pulp mills being built by Singapore-based Asia Pulp & Paper (APP). At 2,800ha, the mill, river and sea ports are the size of a town.

APP is building the US$2.6 billion (S$3.7 billion) mill, majority-funded by a Chinese bank, to feed ever- growing demand for paper products from Asia's rapidly growing middle class. But to do that, the mill, once running at full capacity by around 2018, will consume a vast amount of timber. And that has conservationists worried.

"The construction of such a massive mill certainly raises questions about whether APP will be able to maintain its 'zero deforestation' commitment once it starts operating," said Mr Christopher Barr, executive director of Woods & Wayside International and a veteran pulpwood sector analyst.

APP, part of Indonesia's Sinar Mas Group, says the mill in Ogan Komering Ilir (OKI) district in South Sumatra will rely only on Acacia plantation timber, not rainforest timber, reflecting its zero-deforestation pledge made in 2013.

  • OKI MILL FACTBOX

  • AREA: 2,800ha, including sea port

    COST: US$2.6 billion (S$3.7 billion)

    FUNDING: US$1.8 billion from China Development Bank, remainder from shareholder funds

    CAPACITY: 2 million tonnes of pulp, including 500,000 tonnes of tissue

    WOOD REQUIREMENTS: About 8.6 million cu m of timber a year, equivalent to harvesting roughly 70,000ha of plantation timber

    PROCESSING: Pulp to be processed at APP's paper mills for domestic use and export

The mill's appetite, though, will be vast. At full capacity, it will consume 70,000ha of plantation timber a year - roughly the size of Singapore. The company normally runs five-year rotations for its plantations, from planting to harvest. That means the mill will need a minimum planted area of 350,000ha to ensure adequate supply.

And it is the supply question and the development of new plantations, particularly on flammable peatlands, that are major concerns for conservationists. APP already has large plantations on peatlands, particularly in Sumatra.

Nationally, APP's land bank is 2.6 million ha, most of which is in Sumatra. APP, Indonesia's largest pulp and paper firm and the world's third largest, competes with Singapore-based Asia Pacific Resources International Holdings, with a landbank of one million ha.

Both companies already have large mills in Indonesia and the Indonesian government is keen for the sector to expand further. An ambitious plan targets to more than double pulpwood plantation area to between 10 million and 12 million ha, though the government promises that this will be done responsibly and not at the expense of high conservation value forests.

Building a large mill risks putting more pressure on the environment, some NGOs and analysts say.

"Mega-scale pulp mills are highly capital-intensive, providing a strong incentive for producers to operate at full capacity regardless of market conditions," Mr Barr said.

"And the inherent unsustainability of industrial plantations on drained peatlands could mean the company has to develop new areas again and again," he told The Straits Times in an e-mail.

But perhaps his biggest concern is the risk of the plantations failing to produce enough timber.

APP managing director of Sustainability Aida Greenbury told The Straits Times the mill will be a showcase for the company's green credentials and said no rainforest timber would be used.

In an interview in her Jakarta office, she said any new plantations to feed the mill and other APP operations would only come after the completion of conservation assessments of forests within their concessions and consultations with local communities. This was in line with a moratorium on new plantings. The firm has teamed up with conservation groups such as Greenpeace and Rainforest Alliance to ensure it sticks to its green pledges.

APP, however, has a long history of large-scale deforestation prior to the release of its Forest Conservation Policy in 2013. This has left many peatland areas vulnerable to fires and to subsidence, leading to flooding during the wet season.

Ms Greenbury insists APP will not stray from its environmentally sustainable path with the new mill.

She bristled at the suggestion the mill will cause more haze because of the need to develop more land.

"You cannot just say development equals to haze. Responsible development can actually resolve haze,"? she said, pointing to APP's recently announced programme to improve peatland management.

Burning peatlands is a major source of the acrid haze that engulfs Sumatra, Singapore and Malaysia, and a number of APP suppliers have regularly topped the list of concessions with large numbers of fire alerts in recent weeks. The Singapore Government last month started legal action against APP over fires in some of its concessions.

Conservation groups still have doubts and question the need for the new mill and its benefits.

On a recent visit, The Straits Times saw dozens of barges carrying fuel, soil, pilings, shipping containers and machinery destined for the mill site. APP says the mill will provide thousands of jobs and boost South Sumatra's GDP.

"Paper buyers and investors should be asking if the OKI mill and the massive expansion of the plantation industry it represents is the right direction for APP and Indonesia at this juncture,"?said Mr Lafcadio Cortesi of Rainforest Action Network. APP "should be putting its focus into resolving its legacy of past harm", he said in an e-mail.

Environmental NGOs are concerned about where APP will get its plantation timber in the long term.

"The OKI mill will require a huge land bank to meet its fibre needs and much of this would be sourced from areas that communities depend upon for their livelihoods, as well as from carbon-rich peatlands that would need to be drained to be planted (on),"?Mr Cortesi said.

One villager, Mr Atuk, 64, complained that he was never properly consulted about the mill. He felt not enough local people were being employed. He told The Straits Times the 40 million rupiah (S$4,000) he received for selling 7.5ha of riverfront land to APP was not enough.

Mr Suharto, 55, one of the leaders of the adjacent village of Bukit Batu, said the village was happy enough for now. He said the mill had promised villagers access to filtered water and a new road, although these had not been delivered yet.

Ms Greenbury said APP was trying to improve community consultation. She also said it would have enough plantation timber supply for the OKI mill and its two other mills in Sumatra, with perhaps a shortfall in 2019 or 2020, in which case it would import wood chips.

Mr Phil Aikman, a senior Greenpeace campaigner who is working closely with APP, told The Straits Times the conservation group was satisfied for now that APP is improving and carrying out its pledges, subject to regular reviews.

Ms Greenbury said the company was aware of the damage done by its past practices and was now in a hurry to remedy them. Asked if APP had a lot of things to clean up, she said: "Definitely a lot. But we are cleaning it up while others are not."

A version of this article appeared in the print edition of The Straits Times on October 05, 2015, with the headline 'Upcoming APP pulp mill 'will guzzle timber''. Print Edition | Subscribe