Local PE market in Indonesia hit all time low in 2018, supply to blame

The domestic PE market in Indonesia has been constantly moving lower since September and October 2018 after a prolonged period of sustaining the firm stance throughout the earlier months of this year. At the moment, both HDPE and LLDPE film markets are at its lowest point of the year, data from CommoPlast showed.

Compared to the cyclical peak during early October, the average HDPE film prices based on FD Indonesia, cash equivalent has fallen nearly $250/ton while LLDPE film plunged about $215/ton compared to mid of September.

Improved supply condition is one of the main factors driving the market lower and sources believed that room for further reduction is rather ample. “The market is bloated with import arrivals, mostly cargoes from India, Middle Eastern, and the USA. We could purchase these cargoes in the distribution market at way below local producer’s price list,” a buyer commented.

“We have a huge amount of imported materials in our warehouses now, selling mostly at loses. The main aim is to deplete these inventories before prices decline further, but customers are not showing much interest,” said, a local trader. The source said that the previous production issues from two major local producers had got many traders concerned on the supply condition, which spurred panic sourcing for import cargoes.

“Too much of cargoes arrived, that is the problem. Buyers are having many choices that give them strong negotiation power,” another market source added. However, the plunged in the upstream ethylene and crude oil market are also the added elements in the shallow sentiment in recent weeks.

At the time this report is published, domestic offers for LLDPE film stand at IDR16,700,000-19,140,000/ton ($1155-1318/ton) and HDPE film at IDR18,400,000-21,550,000/ton ($1273-1484/ton), all excluding VAT, cash equivalent.