Indonesian polyethylene (PE) and polypropylene (PP) resin importers and converters need to apply for annual import quotas to continue importing these products next year, as Indonesia looks to tighten imports.
The mandate takes effect on 10 March 2024. The Indonesian trade ministry made the announcement on 11 December, leaving domestic importers with 90 days to apply for their desired import quota.
There was market talk and concerns about polyolefin resin import quotas coming into the picture since last year. But the recent announcement still comes as a shock to domestic importers, as well as international exporters, because there is only a short period to apply for import quotas.
Indonesian importers, or distributors and converters, will need to apply for specific annual quotas to be able to import PE and PP resins from 10 March 2024 or risk their cargoes getting rejected during customs clearance. A surveyor report is also required for resin imports from 10 March 2024.
There have been such import quotas for PP block copolymer imports into Indonesia over the past few years but this policy has now been extended to other PE and PP grades, according to market participants.
Imports of low-density polyethylene (LDPE) and PE with HS code 390140 are excluded from the latest policy because of a lack of domestic production.
Import interest to rise?
Indonesian converters had earlier refrained from making large PE and PP purchases because of uncertainty over prices and a weak demand outlook. But import interest among converters could rise in the short term, for cargoes that can arrive before 10 March 2024.
Domestic market participants deem the quota application period to be short and some PE and PP converters have shown more interest in importing, especially PP, this week. Some converters are willing to replenish slightly more, dreading a delay in application processes that could impact their plant operations later.
Market participants already anticipate a slight rise in Indonesia's PE and PP demand early next year, as converters are expected to lift production of finished goods to meet higher downstream consumption during the Eid al-Fitr festival in early April.
Argus assessed duty-free PP raffia prices at $950-980/t cfr southeast Asia on 15 December, up by $20/t on the week. Duty-free LLDPE and HDPE film prices held steady at $940-1,000/t cfr southeast Asia and $1,020-1,040/t cfr southeast Asia respectively in the same comparison.
Indonesia imported around 40pc of its combined LLDPE and HDPE consumption and more than 60pc of its PP consumption in 2022. The country imported around 604,000t of combined LLDPE and HDPE and 1.05mn t of PP from January-October, compared with 618,000t and 1.3mn t respectively in the whole of 2022, GTT data show.
The import quota introduction has raised concerns among international PE and PP exporters that send supplies to Indonesia. Overcapacity concerns globally have led to producers targeting Indonesia for higher sales netbacks this year, capitalising on its high import dependency and a lack of domestic capacity expansions in the short term. This has likely exerted pressure on Indonesian PE and PP prices and threatened domestic production because of high import availability.
Indonesia began an anti-dumping investigation into imports of PP copolymer from five origins in late August, prompted by Indonesia's largest petrochemical producer Chandra Asri.
Increasing PE and PP supplies and market expectations of more capacity expansions in the coming years, coupled with a slow recovery in downstream consumption, have led to protectionism measures across southeast Asian countries. This normally leads to increased polymer import tariffs and introduction of import quotas, aimed at reducing polymer imports or dumping activity.
