Tuesday, July 16, 2024

Plastic industry investment worth US$27.08 billion postponed over new regulation

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Journalist IBP




The Indonesian Olefin, Aromatic, and Plastic Industry Association (Inaplas) has reported that investments in the plastic industry amounting to US$27.08 billion (Rp439 trillion) have been postponed following the implementation of Ministry of Trade Regulation No. 8/2024.

Business leaders believe that this new import regulation further deteriorates the utilization of the aromatic industry, which has been declining since the beginning of this year.

The Ministry of Industry noted that total investments in the plastic industry are projected to reach US$31.41 billion across six projects by 2030. However, with the new regulation, the total realized investment by the end of the decade is expected to be only US$4.3 billion.

Currently, only PT Lotte Chemical Indonesia, with an investment of US$4 billion and a production target for 2025, and Pertamina in collaboration with PT Polytama Propindo, with an investment of US$322 million and a production target for 2027, that have moved forward with their plans.

“As for the realized investment plans, only these two remain. PT Chandra Asri Pacific will shift its focus to a chlor-alkali plant instead of producing petrochemical products,” Inaplas Secretary-General, Fajar Budiono, said on Monday, July 8, 2024.

Fajar elaborated that Chandra Asri had initially planned to build a second plant with a polypropylene production capacity of 300,000 tons and polyethylene up to 450,000 tons.

The total investment for the new plant was estimated at US$5 billion (Rp63.1 trillion), with a production target for 2029. However, the new regulation has caused Chandra Asri to halt its investment plans.

The regulation is perceived to open the floodgates for petrochemical product imports, making capacity expansion investments less attractive.

Chandra Asri’s decision has been mirrored by three other plants: PT Sulfindo Adiusaha, PT Trans-Pacific Petrochemical Indotama, and PT Pertamina Rosneft Pengolahan dan Petrokimia (PRPP).

PRPP had previously planned the largest investment in the plastic industry, amounting to US$18 billion, up to 2030.

Acting Director General of Chemical, Pharmaceutical, and Textile Industry at the Ministry of Industry, Reni Yanita, confirmed that only two petrochemical industry investment plans would materialize.

Reni noted that Lotte Chemical’s investment realization has already reached 80 percent.

Lotte Chemical plans to produce 250,000 tons of polypropylene annually with its investment. Meanwhile, Pertamina and Polytama’s investment, now 30 percent realized, aims to produce 300,000 tons of polypropylene.

“The other four petrochemical industries are still waiting and observing the domestic situation,” Reni said.

Polyester industry plunges

In addition to investments, Fajar said that the Ministry of Trade Regulation No. 8/2024 has worsened the condition of the polyester industry, alleging that the regulation has led to the domestic garment market being flooded with imported products.

Fajar recorded that polyester industry utilization at the end of 2023 was at 90 percent with a production volume of around 1.25 million tons.

Currently, the utilization rate has dropped to 63 percent with a projected production volume of 990,000 tons by the end of this year.

He cited that the decrease in utilization was due to a decline in demand from the yarn and fabric industry in the first half of 2024.

The implementation of the new regulation in May 2024 has exacerbated the already minimal demand from domestic textile factories.

“The polyester industry has been struggling. The new regulation has worsened the textile industry’s condition, making it difficult for domestically produced polyester to be absorbed,” he concluded.

Journalist IBP






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