APIC ’07: Tripolyta braces for Saudi PP onslaught

16 May 2007 14:43 [Source: ICIS news]

TAIPEI (ICIS news)--Tripolyta, Indonesia’s largest polypropylene (PP) producer, is bracing itself for the onslaught of Saudi exports when new projects come onstream in 2008-9.

These new projects will flood the market, but a senior company official at Tripolyta believes that innovation can pave the way for survival.

“We’ll have to develop high-end products rather than stay in a commodity market,” said vice president director and chief operating officer Jeanne Watulo on Wednesday.

“There are a few new in-house applications that we’re trying to develop.”

She spoke to ICIS news ahead of the Asian Petrochemicals Industry Conference (APIC) which starts on Thursday.

However, Watulo acknowledged that taking on the likes of Saudi Arabian National Petrochemical Co (Natpet) and Saudi Kayan Petrochemical will be tough especially where prices are concerned.

“Their raw material is cheaper. And in 2008 and 2009, when their projects come onstream, we see the spillover to Asia [from extra capacities],” she said.

PP spot prices in Indonesia are about $1,500/tonne (€1,105/tonne) including import duties and value-added taxes-an

“all-time high”, said Watulo, attributing the price levels to high crude prices and short supply.

High raw material prices, however, have driven retailers in the country to come up with more innovative solutions to keep costs down, she said.

For instance, when Indonesian manufacturers first introduced bottled water in 250ml PP cups a few years ago, each cup weighed 4.2gm.

Today, the cups weigh only 3.5gm apiece, she said. “[The manufacturers] were forced to [redesign the cups] because raw material costs are so high.”

Besides high PP prices, Tripolyta faces another problem – feedstock deficit in the country.

In fact, because of the feedstock deficit in Indonesia, producers cannot make enough PP to meet domestic demand, which is growing at about 4-5% per annum.

Currently, PP demand in the country is about 780,000 tonnes/year but the total national capacity much less, Watulo said.

Tripolyta, which produces 360,000 tonnes/year of PP at its Merak, West Java plant, obtains two-thirds of its feedstock from Indonesia’s sole cracker operator Chandra Asri and imports the balance.

Polytama Propindo has 240,000 tonne/year PP capacity and Pertamina produces about 45,000 tonnes/year.

But prices in the next few months could still soften, Watulo said, with new capacity from Formosa Polypropylene’s 450,000 tonne/year facility in Ningbo, China, come July.

“Indonesian prices usually follow Asian pricing. We have to see,” she said.

($1=€0.74)

By: Jeanne Lim
+65 6780 4359

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