Local PE prices in Indonesia reach multi month high, panic buying reported

After an extended period of downtrend, domestic PE market in Indonesia makes an impressive come back in recent weeks thanks to tightened supply and improved buying interest. Data combined by CommoPlast on changes in official price list by one of the major domestic producers showed that compared to mid July, local HDPE and LLDPE film has jumped $180-190/ton.  

Instead of resisting such significant and rapid price hike; buyers in Indonesia are very active in making replenishment this week with some buyers reportedly having comfortable stock until December.

Several factors contributed to such interesting development including limited availability. Ethylene costs firmed up, causing non-integrated PE producers to cut operation rate to protect profit margins, and PT. Lotte Chemical Titan Nusantara is one of such producers. The maker decided to cut contract allocation as much as 50%, forcing buyers to rush to distribution market to fill in the quantity gap.

At the meantime, players also reported Chandra Asri Petrochemical has also slashed contract allocation by 10%, adding more tension to the already short market. “No traders has large enough quantity to fulfil all buyer’s requirement, leading to a seemingly panic situation. Therefore, supporting a local maker to lift PE prices three times within this week,” a market source said. Many traders have to suspend offering to lift prices following the producer’s hike.

Besides, China market is magnetizing most of the import cargoes to Asia these two weeks due to strong buying interest at high prices. Indonesian buyers fear that import arrival might fall drastically in the coming months. A converter added, “We pursued with an PO for Singaporean HDPE film at as high as $1230/ton CIF Indonesia, LC AS term and we can withdraw to the side-line now.”

In addition, HDPE bags manufacturers have been able to transfer the higher costs to end product prices, reinforce the confident to procure additional quantity. The biggest question players are asking now is that how long would this trend sustain?

Many are expecting market to be more of stabilized in the coming week considering healthy gap between ethylene and PE, while most buyers are stocked up much of the needed quantity. “Contract prices are set to firm up as it has been low for too long. At the current spot market level, we think it is hard for prices to move much higher.”