10 December 2004 06:37 [Source: ICIS news]
SINGAPORE (CNI)--Indonesia’s largest polyethylene (PE) producer Petrokimia Nusantara Interindo (Peni) aims to restart its polyethylene (PE) operations in February 2005, based on the company's bullish domestic market outlook for the first quarter of next year, a source close to the company told CNI on Friday.
In early October, Peni shut its 450 000 tonne/year PE plant at Merak in West Java due to poor margins, and the company has postponed the restart plans several times in the past two months as domestic demand remained low.
"The local demand is currently weak because the end-users are buying on a hand-to-mouth basis. They (end-users) will not stock up if the PE prices are weak," he said.
"The PE prices may start to rebound in February if Chinese demand increases. The Chinese stock levels are low, and the buyers need to replenish their stocks soon," the source said.
Some Chinese buyers are holding back their purchases until January and February 2005 to take advantage of an import tariff cut of 1%-3% from 14%, which takes effect from 1 January 2005, he said.
"Once the Asian PE prices start rising, the Indonesian buyers will begin stockpiling," the source said.
Peni is not expected to restart its PE plant within the next month unless the market conditions change dramatically in favour of the company, he said.
Looking ahead, the source played down the potential impact of the bullish ethylene price outlook for the second quarter of 2005 on the PE production margins.
"As long as PE prices move in tandem with the ethylene price hike, it would not be a problem for PE producers," he said.
Meanwhile, Asian integrated PE producers such as Malaysia's Titan Petrochemical and Polymers have cut their PE production rate drastically amid the current weak production margins.
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