Indonesia withdraws import mandate for key PE, PP

The Indonesian trade ministry has withdrawn the enforcement of a mandatory import quota for most polyethylene (PE) and polypropylene (PP) grades, along with polystyrene, polyethylene terephthalate and monoethylene glycol, which was previously expected to take effect on 10 March.

The official announcement was made on 6 March and supported with a decree released today, seen by Argus. Market participants have waited for an official statement following a semi-official announcement by the trade ministry on 29 February.

Imports of PP co-polymers will still require an import quota, which has been in force for years. The latest requirement of an additional surveyor report from 10 March has also been withdrawn.

The trade ministry announced on 11 December that domestic PE and PP importers will need to apply for specific quotas to be able to import polymer resins from 10 March, or risk cargoes being rejected during customs clearance.

Indonesia's PE and PP import dependency and the short-notice enforcement have led to objections by local and international associations, with disrupted resin supplies likely to cause a significant impact on the production and competitiveness of finished plastics. The enforcement was earlier expected to be delayed possibly by at least three months, based on local associations' appeal requests to the trade ministry.

Indonesia imported 749,000t of combined liner low-density polyethylene (LLDPE) and high-density polyethylene in 2023, more than 45pc of its annual consumption, according to Argus estimates. Imports increased by 21pc from 2022. The country also imported 1.25mn t of PP in 2023, around 65pc of its annual consumption, but this was down by 5pc from 2022.

Indonesian PE and PP buying interest and imports are expected to resume slowly from March with key distributors and converters holding high inventories because of an earlier stockbuild.

Converters are also expected to reduce operating rates in March–April during Ramadan and the Eid al-Fitr holidays. Converters could take longer to consume their resin stocks as a result.

The country will be closed for the Eid al-Fitr holidays on 8–15 April, but some converters could shut their plants earlier, further limiting import discussions. Some converters began making enquiries for resin supplies, but mainly preferred cargo arrivals from mid-April.

Tighter supplies add price support

The stocking up of domestic PE and PP supplies, unplanned cuts in domestic production and restricted imports led to higher prices in Indonesia during January–February. The imminent withdrawal of import mandates could lead to domestic prices falling, especially for the commodity grades, because of converters and distributors' earlier stockbuilding.

Some key distributors began reducing domestic prices slightly last week following the semi-official announcement.

But regional PE and PP import prices are already far below Indonesian domestic prices, so the impact on import prices may be limited.

PE and PP supply at Indonesian and regional producers could tighten in April–May because of plant maintenance plans, which could balance the slowly returning demand in Indonesia and support prices. Indonesia's Chandra Asri is expected to shut its sole naphtha cracker, 736,000 t/yr PE plant and 590,000 t/yr PP plant from late April or May for a major 45-day turnaround, according to market sources.

The return of Indonesian imports could help regional markets achieve some stability. Converters across southeast Asia are resisting current high PE and PP offers, citing weak downstream demand.

Argus assessed southeast Asian duty-free LLDPE film prices at $1,060-1,100/t cfr southeast Asia on 8 March, $40/t higher from two months ago. Southeast Asian duty-free PP raffia prices were $1,050-1,070/t cfr southeast Asia on 8 March, $40/t higher compared with two months ago.

Chinese LLDPE film and PP raffia prices were $940-950/t and $910-920/t cfr China, respectively, on 8 March, keeping stable and rising by $30/t, respectively, from two months ago.

By Yee Ying Ang