Just Published: Indonesia Petrochemicals Report Q1 2010

Recently published research from Business Monitor International, "Indonesia Petrochemicals Report Q1 2010", is now available at Fast Market Research
 
Dec. 29, 2009 - PRLog -- Lack of adequate feedstock and a poor business environment are undermining the recovery in Indonesian polymer output, according to BMI's Indonesia Petrochemicals Report. In 2009, the Indonesian petrochemicals industry had olefins production capacities of 620,000 tonnes per annum (tpa) ethylene and 655,000mn tpa propylene. In the aromatics segment, Indonesia has plants with combined capacities of 335,000tpa benzene and 895,000tpa xylenes. These aromatic compounds are used to manufacture intermediate petrochemicals products, with Indonesia hosting 350,000tpa styrene monomer (SM), 1.46mn tpa terephthalic acid and 500,000tpa vinyl chloride monomer. These feed polymer plants with combined capacities that include 55,000tpa polystyrene (PS), 730,000tpa polyethylene terephthalate (PET) and 620,000tpa PVC. In the styrenics chain, Indonesia also has capacities of 60,000tpa styrene-butadiene rubber and 40,000tpa acrylonitrile-butadiene-styrene copolymer. In the polyethylene segment, Indonesia has capacities totaling 550,000tpa HDPE and 200,000tpa LLDPE. In addition, it has 670,000tpa PP capacity. In the fertilizer sector, Indonesia possesses 6.14mn tpa ammonia and 8.03mn tpa urea. A number of plants were shut in Q209-Q309 as producers brought forward maintenance turnarounds in order to clear inventories and stabilise the market. Chandra Asri cut operating rates at its 620,000tpa cracker in Merak to around 75% in Q209 due to poor margins related to rising naphtha costs. In Q309, Chandra Asia also reduced operating rates at its 360,000tpa propylene unit due to poor margins. At the same time, downstream polymer plants were cutting run rates, partly in response to poor demand conditions as well as a lack of feedstock. Indonesia's PP deficit is becoming more problematic, prompting an increase in investment in the sector. In June 2009, Pertamina selected Dow Chemical's UNIPOL PP Process technology for its new 250,000tpa PP plant at its Balongan complex. The project is expected to be completed by 2011 and will cost up to US$300mn. Local polymer demand has suffered as a result of the economic downturn, despite domestic consumption in the wider economy holding up comparatively well. The decline was blamed on declining market activity by thermoplastics consumers in Indonesia and the falling value of the rupiah, helping to depress imports and leading to domestic scarcity. Yet, despite poor demand, the government is reducing import tariffs on PE and PP due to the enduring problem of scarcity. In August 2009, the Industry Ministry proposed to waive import duties on PE and PP in 2010. This would apply to PE and PP products that are yet to be manufactured locally and are used in plastic packaging. Although PE and PP are already produced locally, they are yet to meet locally required specifications. Strong domestic PP demand has encouraged Pertamina to go ahead with its planned 250,000tpa PP plant, which is due to be completed in 2011 and will be Indonesia's largest PP producer. However, BMI cautions that greater PP self-sufficiency cannot be achieved if the country does not sustain an adequate local supply of propylene.

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