Indonesian PE buyers seek alternatives as local prices extended firming trend

Local PE offers in Indonesia has been steadily following the firming trend since mid July on the back of tightening supply and improved demand condition. Until today, official price list from a major domestic producer indicated about $230/ton increased on LLDPE film cargoes while HDPE film added approximate $220/ton within the same period, based on data combined by CommoPlast. Converters in the sector are unable to transfer the full hike in raw material costs to end product prices, and slowly turning to substitutions to protect margins.

A HDPE bag maker reported to have suspended all purchases once local offers reached IDR17,000,000/ton ($1284/ton) excluding VAT, FD Indonesia, cash term. This price level has last seen on the first week on September. The source added, “Our end product prices are no higher than IDR17,500,000/ton ($1322/ton) with the same term. The margins are too small to accommodate higher raw material prices. At the moment, we are having one month worth of inventories on hand, hence in no rush to make replenishment.”

Another HDPE bag converter, sell mainly in local market added, “We are sourcing some recycle cargoes in recent weeks to lower the overall input costs. We hope to increase end product prices in the near term as the firming trend in local PE market might persist longer.”

Local recyclers have also reported a sudden surge in HDPE orders, “We don’t normally received this number of orders and we need to schedule our production to fulfil all the inquiries.”

As buyers resisted and turned away from high price prime cargoes, traders find it difficult to follow the hike introduced by local producers and many decided to maintain offers unchanged to entice buying interest. “We are not planning to follow the hike. Local demand is diminishing and we plan to deplete more cargoes this week,” a source said.