Indonesia Daily Focus October 2, 2026

Chinese restocking lifts pulp prices, though INKP books the gain a quarter late. Bleached hardwood kraft pulp (BHKP) in China rose to USD585/ton in Sep-26 from USD568/ton in Aug-26 as buyers restocked ahead of a seasonally stronger 4Q. Suzano also has raised its October China price by a further USD20/ton to c.USD600/ton. With the 3Q26 benchmark down 4.7% QoQ at USD577/ton and shipments trailing orders by a month, we expect INKP's pulp ASP to dip in 3Q26 before recovering in 4Q26.

New capacity puts pulp prices back under pressure from 2027. RISI estimates China will add 2.8mn tons of integrated pulp capacity, cutting its import needs, while OKI II (1.4mn tons) and Sucuriú (3.5mn tons) add market pulp supply equal to c.10% of global volumes. Although most of that volume should arrive in 2028–29, we doubt the rising cost floor will hold and assume USD550/ton for FY27F and USD500/ton for FY28F, down c.5% and c.9% YoY.

Packaging ramp-up is on track to cushion a softer pulp cycle. Jul-26 BPS export data shows the Indah Kiat Karawang (IKK) ramp-up on schedule, with white solid bleached board (SBB) volume up 60% MoM to 20.9k tons and brown test liner down 21% MoM but still historically high. Ramp-up costs still weigh on 3Q26 earnings, but we see IKK turning profitable in FY27F, just in time to cushion INKP's earnings as pulp prices weaken.

Maintain BUY with unchanged TP of IDR13,500, implying 5.1x FY27F EV/EBITDA. We reiterate BUY as pulp prices stabilise and the IKK ramp-up stays on track. Our forecasts already absorb the recent pulp weakness, and with 9M26 prices averaging USD589/ton against our FY26F assumption of USD580/ton, we see modest upside to our estimates. Key risks include a sharper fall in pulp and paper prices, a slower IKK ramp-up, government intervention in exports, and changes to related-party terms.