Indonesian players: Political instability could dampen demand condition

The recent pick up in demand for PE from the flexible packaging sector ahead of the Ramadan season might be dampened as the political instability scared buyers away, Indonesian sources said. 

A series of bombing in the city of Surabaya, where major converters in the PP and PE sector are located, have aroused heavy concern among players that purchasing activities might fall as a result. “This is not new in Indonesia, however, things are a little different this time. End users might prefer to stay indoor instead of active Ramadan shopping, which is very bad for demand,” a trader said.

However, flexible packaging manufacturers have yet to feel the impact as many are still rushing to fulfil Ramadan orders. “Our plant is running at full rate at the moment as Ramadan orders come late. We hope the authorities would get the situation under control soon, as prolong instability would affect the economy negatively,” a PE converter said.

Traders in the Surabaya cities are watching out closely the situation, at the meantime, adopting a cautious stance. “Demand would surely be impacted if the bombing spread to other cities. We plan not to keep too high inventories in the near term also to avoid the possibility of weaker sentiment during Ramadan months,” another trader said. 

At the time this report is published, local market in Indonesia, especially PE prices, remain relatively firm thanks to the lack of supply condition. Prices with out VAT, based on FD Indonesia, cash equivalent are currently at:

IDR 19,350,000-19,900,000/ton or $1378-1418/ton for LLDPE film 

IDR 22,400,000-23,280,000/ton or $1596-1659/ton for HDPE film 

IDR 18,800,000-19,140,000/ton or $1339-1364/ton for homo-PP yarn

Exchange rate USD 1 = IDR 14032