Indonesia: Local homo-PP market found support to stabilize as demand comes back

The local homo-PP market in Indonesia has been on a roller coaster ride since mid of December 2019, surging about $175/ton in a span of six weeks. However, the market peaked out on 20 January 2020, from which spot prices have plunged into its multi-year low levels at the time of this report, 28 February 2020.

Data from CommoPlast suggested that compared to the mentioned peak level, spot homo-PP yarn based on FD Indonesia, excluding VAT has shredded about $220/ton as a result of weakened demand and increased availability from overseas sellers. 

The intense downward pressure seems eased at the moment thanks to the depreciated Indonesian Rupiah against the US dollar that encourages buyers to return to make replenishment before the market could make a V-shape recovery. 

Currency data on OANDA underlines a 1.4% depreciated in value of the Rupiah against the US dollar within this week, while compared to a week ago, the Rupiah has weakened 3.15%.

“We think the market has temporarily reached the bottom. Sales are healthy over the past couple of days though we have only been able to increase the price by about $10/ton to reflect the currency situation,” a local trader reported. 

Several other suppliers decided to implement a more aggressive stance by adjusting offers twice this week, adding $25-30/ton from the beginning of the week. Spot homo-PP yarn in the local ground is reported in the range of IDR13,500,000-14,310,000/ton excluding VAT, FD Indonesia term.

Meanwhile, certain grades produced locally, including those from Polytama and Pertamina might face tighter supply in the near term as both producers are planning maintenance shutdown in March.

“We proceed with the procurement of additional quantity this week. The local currency might continue to weaken in the coming days, meaning that suppliers could increase offers sharply. End product demand remains relatively sluggish at the moment,” a woven bag manufacturer added.

The gradual increase in domestic spot offers might not support international sellers to implement any major hike in the immediate term, Indonesian player said, citing the fact that appreciated USD makes it more expensive to purchase import cargoes.

“We are very cautious. The impact of the recent COVID-19 outbreak on the global economy could be severe at the time the new supply is mushrooming. The pressure is rather strong,” another buyer added.