Indah Kiat’s Karawang Ramp-Up Offers a Buffer as Pulp Prices Face 2027 Pressure
Indah Kiat’s Karawang packaging mill is expected to become profitable in 2027 as utilization rises. However, new pulp capacity in China, Indonesia and Brazil could push benchmark prices lower and reduce the company’s gains from the ramp-up.
New supply challenges the pulp market
Global pulp prices could come under renewed pressure from 2027 as major projects increase supply and Chinese mills reduce their reliance on imported fiber. Mirae Asset Sekuritas estimates that China will add 2.8 million tonnes of integrated pulp capacity. Indonesia’s 1.4 million-tonne OKI II project and Brazil’s 3.5 million-tonne Sucuriú project will add market pulp capacity equivalent to about 10% of current global volumes.
Most of the additional volume is expected to enter the market in 2028 and 2029, but expectations of greater availability may affect pricing earlier. Mirae Asset assumes a pulp price of $550 per tonne for 2027, about 5% below the previous year, followed by $500 per tonne in 2028, a further decline of approximately 9%.
The forecast follows an already weak period for bleached hardwood kraft pulp in China. KONTAN reported that BHKP traded at $568 per tonne in August 2026 and had remained below $600 per tonne since March. The year-to-date average was about $590 per tonne, while prices during the first nine months of 2026 averaged $589 per tonne, according to Mirae Asset.
Karawang packaging output gathers pace
For PT Indah Kiat Pulp & Paper Tbk, the expansion of industrial paper and packaging production at Indah Kiat Karawang provides a counterweight to the weaker pulp cycle. The first phase began operating in April 2026. Indonesian export data cited by Mirae Asset showed white solid bleached board shipments rising 60% month on month to 20,900 tonnes in July. Brown testliner exports fell 21% from June but remained historically high.
The trade figures include shipments from other Indonesian producers and therefore provide only a directional measure of the mill’s progress. Nevertheless, Mirae Asset said the data were consistent with Karawang’s start-up schedule. The securities firm expects the facility to contribute $438 million of sales in 2026, or about 12% of Indah Kiat’s total revenue.
Ramp-up costs remain a near-term burden. Mirae Asset previously projected a $34 million EBITDA loss for the facility in 2026, followed by positive EBITDA of $110 million in 2027 and $300 million in 2028. Its model assumes 50% utilization, below management guidance of close to 60%. Packaging revenue across Indah Kiat rose 27.6% year on year to $566 million in the first half of 2026, although the segment’s margin narrowed to 5.1% because of start-up expenses.
Higher utilization could soften the earnings impact
Mirae Asset expects Karawang to become profitable in 2027, when weaker pulp prices are likely to weigh more heavily on the group. By 2028, packaging is forecast to generate 49.9% of revenue and 34.1% of gross profit, compared with 27.9% and 13.0%, respectively, in 2025. This would leave Indah Kiat less dependent on commodity pulp prices, although the company would retain substantial exposure to the broader paper cycle.
Asia Pulp & Paper, which markets Indah Kiat’s output, raised global prices by 5%-10% from August 13, 2026, and increased domestic prices by about $20 per tonne one week later. Those increases may support margins as utilization improves. Mirae Asset maintained its buy recommendation and IDR13,500 target price, while identifying sharper pulp and paper price declines, a slower Karawang ramp-up, government intervention and changes in related-party terms as the principal risks.
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