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Indonesia Petrochemicals Report Q2 2010
Market |
Energy and Utilities |
Report Type |
Market Research |
Country |
Indonesia |
Published |
3 March 2010 |
Number of Pages |
56 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
The latest Indonesia Petrochemicals Report predicts rapid growth in the local market, leading to tightening markets and growth in prices, although this will be mitigated by reductions in imports tariffs and a strengthening rupiah which will suck in petrochemicals imports.
Going into 2010, there are widespread concerns of scarcity of domestically sourced materials over the short term as some producers have been cautious about increasing production fearing that it could swing prices the other way and create a situation of oversupply. Forecasting GDP real growth of at least 5.2% in 2010 that will outperform regional peers, we believe that it is unlikely Indonesia will see a double-dip in the local petrochemicals market. While demand growth is a positive sign that the market is picking up, a rapid rise in petrochemicals prices is detrimental to petrochemicals consuming industries. The government’s move to reduce import tariffs on PE and PP could create more stability in the market, as will the recovery in the value of the rupiah, which went from a low of around IDR12,000/US$ in Q209 to around IDR9,000 by the end of the year. However, We caution that this could lead to a flood of cheap Chinese imports at a time when the Indonesian market is opening up to China under a controversial free trade agreement.
In response to a contraction in the market and rising naphtha costs in 2009, producers had cut operating rates, with crackers running at around 70-75% capacity in H209. A significant appreciation of the rupiah throughout 2009 brought down the cost of imports helped limit the negative effects of the cut in local ethylene and propylene feedstock availability on downstream margins.
In 2009, the Indonesian petrochemicals industry had olefins production capacities of 620,000tpa ethylene and 655,000mn tpa propylene. In the aromatics segment, Indonesia has plants with combined capacities of 335,000 tonnes per annum (tpa) 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.
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. The expansion of Tripolyta’s PP plant in Merak to 480,000tpa in 2011 will provide an extra 120,000tpa of PP capacity in Indonesia. With domestic PP demand due to reach 1.1mn tpa in 2011, the expansion of capacity at both Merak and Balongan will not be enough to reduce Indonesia’s dependency on imported PP. We caution that greater PP self-sufficiency cannot be achieved if the country does not sustain an adequate local supply of propylene, which as mentioned has been problematic.
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