Focus story by Angeline Soh
SINGAPORE (ICIS)--Indonesia’s polypropylene (PP) prices are expected to rise in the coming weeks on tight supply and higher demand ahead of the Muslim fasting month but long-term outlook hinges on the outcome of presidential elections in July, market sources said on Thursday.
The country is set to witness a period of political uncertainty as no clear winner is emerging following the legislative elections that took place last week.
Vote counting will continue this month and results will be announced in May. Later in July the legislative assemblies will elect a president.
Domestic PP prices have been largely stable in Indonesia, with PP injection and flat yarn assessed at $1,635-1,640/tonne DEL (delivered) Java during the week ended 11 April, according to ICIS data.
PP prices are expected to trend up amid snug supply as a result of a shutdown of local producer Polytama Propindo’s plant. The 380,000 tonne/year PP unit at Balongan, West Java, was taken off line on 3 April and a restart date is not known yet.
The uncertainty over the restart date for that plant as well as various scheduled plant shutdowns in other southeast Asian countries could bolster import prices, sources added.
Vietnam’s Binh Son Refining & Petrochemical is expected to shut down its 150,000 tonne/year PP plant at Dung Quat industrial park in Quang Ngai province from mid-May to early-June.
Malaysia’s Lotte Chem Titan is expected to shut its 200,000 tonne/year PP plant in Pasir Gudang on 9 May for 12 days.
Meanwhile PP demand in mostly Muslim Indonesia is expected to surge next month ahead of the fasting month of Ramadan, which is expected to start toward the end of June and finish toward the end of July.
Downstream demand for end-products, such as plastic packaging for food and beverages, typically increases in most Muslim countries during the month when people fast from dawn to dusk.
In the long-term outlook, Indonesia’s PP market players said it was mixed as the country goes through the process of national elections.
They said depending on the outcome of the presidential election PP market could either get a boost or come under pressure as competing political parties had different views and policies on trade and investments.
One political party favours nationalism and tighter controls on imports and foreign investment that will not augur well for the PP market.
Some market players said based on preliminary vote counts there was a growing possibility of a coalition government, which may create more uncertainty in the market.
“If more regulations are imposed on imports and foreign investments, the market may lose its vibrancy and competitive prices,” a Indonesia-based trader said.
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