16 October 2012 13:05 [Source: ICIS news]
By Chow Bee Lin
“Be prepared for a surprise,” a Chandra Asri source said, referring to the company’s ongoing expansion plans at Cilegon in West Java, Indonesia.
The source declined to reveal the surprise element but one might guess from his smiles that it was going to be a pleasant one – the type that might help stem the company’s declining profit margins.
Chandra Asri, the sole naphtha cracker operator in ?xml:namespace>
Any positive developments will be great for Chandra Asri because its shrinking profit margins had already led Moody's Investors Service to downgrade its rating from stable to negative in August this year.
But Chandra Asri is not the only one that needs a booster. The country’s polyolefins industry as a whole needs to rejuvenate.
Foreign and local private investors have expressed interest to build new ethylene and derivative plants in
“Every government department has its own ideas of how to develop the local petrochemical industry, there’s no coordination,” one of the sources said.
Chandra Asri plans to expand its ethylene capacity to at least 1m tonnes/year if a new refinery is built in
But private investors’ attempted foray into the refining sector, currently dominated by state-owned Pertamina, has been impeded by a lack of government support, local sources said.
Honam Petrochemical’s ethylene cracker and derivatives project could help drive developments in the local automotives and electronics appliance application sectors because, according to INAPLAS, most of the resin used in these sectors are currently imported from
Honam Petrochemical already supplies PE to
Most of the locally produced PP and PE resins are used in food packaging and woven bag applications, local sources said.
Food packaging is the biggest application sector for the local plastics resin producers, and resin demand growth in this application sector is estimated at an average of 10% per year, said Sadiman.
The average plastics resin demand growth in the local automotives application sector is estimated at more than 10%, but the base is much smaller, he said.
Plastics resin demand in the agricultural film application sector is seasonal, depending if the local rice farmers had a good harvest, said Sadiman. “We didn’t have a golden harvest for rice this year,” he added.
Increased local ethylene and derivate products could invigorate the whole local plastics processing sector whose growth has been capped by high raw material costs and intense competition from imported semi-finished and finished plastics products, local sources said.
Semi-finished and finished plastics products imported into
Local plastics resins are expensive because two of the local producers have to import naphtha or ethylene as feedstock, they said.
About 50% of the country’s polyolefin demand is covered by imports, and polyolefin imports into
Polyolefins imported from six ASEAN (Association of Southeast Asian Nation) countries namely
Local polyolefin importers were issued annual duty-exemption quotas in July this year which allow them to buy resins from any non-ASEAN countries without paying import duties, and the quotas could only be applied from September, a local trader said.
Nobody knew when to expect the quotas, hence it was a surprise to many when they were finally issued in July, the local trader said.
That’s probably just one of the surprises the local plastics industry does not need.
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