Persistent weak demand cast effect on local HDPE market in Indonesia

Domestics HDPE film market in Indonesia has been steadily firming up since mid November 2017 on the back of tight supply condition and strong upstream cost. The continuous hike pushes offers to the range $1630-1690/ton without VAT, FD Indonesia, cash equivalent as of 9 February 2018 – the highest levels seen in many months.

Buyers started resisting the offers citing negative margins amid slower than expected end product demand. In a surprised turn, major traders in the country are cutting price list by as much as IDR400,000/ton ($29/ton) on the first trading day of this week, bringing latest offers to IDR22,600,000/ton ($1655/ton) without VAT, FD Indonesia, cash equivalent.

“Our end product business is down 50 per cent as customers are unable to accept the current raw material costs. As a result, we are not planning to make fresh buy in the near term,” a converter said. A number of other converters are sharing similar situation.

Meanwhile, other traders don’t quite supporting the price cut citing the lack of availability in the market. “Buyers are slowing down purchasing activities and yet we are not having material on hand. We think this trend is very temporary and that market shall regain stabilisation soon,” another trader opined.

At the meantime, many buyers believed that market is nearing the peak and room for further hike is now very narrow. A source explained, “We could not accept any additional price increment and our end product is about 10% below raw material costs. We might suspend all purchases if suppliers lift offers again in the near term.”