FocusIndonesia PP makers to stop import duty cut

20 June 2008 04:27  [Source: ICIS news]

By Chow Bee Lin

SINGAPORE (ICIS news)--Indonesia’s polypropylene (PP) industry plans to submit a proposal to the government next week which, if accepted, will block cuts in import duty on polyolefins supplied from Most Favoured Nations (MFNs), a senior industry official  said on Friday.

“Our proposal is for the local industry to invest in new capacity over the next few years if the import duty on material from the MFNs is maintained at 10%,” Budi Susanto Sadiman, secretary-general of the Indonesian Olefins & Plastic Industry Association (INAPLAS) said.

He added that two local producers, namely Tripolyta and Pertamina had drawn up expansion plans.

Under its World Trade Organisation membership obligations, Indonesia is to reduce the import duty on PP and polyethylene (PE) imported from the MFNs to 7.5% in January, from the current 10%, said Sadiman.

Local oil and gas major Pertamina plans to install a residual fluid catalytic cracking (RFCC) unit at Cilacep by 2012 to produce 150,000 tonnes/year of propylene, and establish a new 250,000 tonne/year PP plant in Balongan by the end of 2010, a company source said.

The producer also planned to expand its propylene capacity at Balongan city, West Java, by 80,000 tonnes/year to 260,000 tonnes/year by the second half of next year, the source added.

Pertamina currently operates a 46,000 tonne/year PP plant at Palembang and is due to start up an olefins conversion unit at Balongan by 2010 to produce about 180,000 tonnes/year of propylene.

Tripolyta could not be reached for comment.

Indonesia’s sole cracker operator Chandra Asri, which runs a 300,000 tonne/year PE facility at Anyer, West Java, had no plans to expand its capacity as the existing local capacity was currently sufficient, and local PE demand growth was expected to slow due to the recent price hikes, a company source said.

Indonesia’s total PE production was estimated at 750,000 tonnes/year if all the plants were running at full capacity, and demand was only about 700,000-750,000 tonnes/year, he said.

Local demand growth was expected to slow this year as the recent steep increases in PE prices would lead the local plastics processing sector to consolidate, with small plants in Bandung and Surabaya shutting down, he said.

“The big will get bigger and the small will be gone,” he said.

The import prices of different grades of PE have risen to $1,750-1,850/tonne CFR southeast Asia in the week ended 13 June, $55-150/tonne higher from four weeks ago, according to global chemical market intelligence service ICIS pricing.

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By: Chow Bee Lin
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