Indonesia may delay PE, PP import quota enforcement

The Indonesian trade ministry may delay the enforcement of a mandatory quota for polyethylene (PE) and polypropylene (PP) imports to Indonesia that was earlier expected to come into effect on 10 March, according to local sources.

The enforcement could be delayed by at least three months, based on local associations' appeal requests to the trade ministry, and this may be announced soon, according to market sources. The associations had mostly requested for a grace period to be given to PE and PP importers after the mandate takes effect on 10 March. No official announcements have been made.

Local associations including the Indonesian chamber of commerce and industry (Kadin), Indonesian employers association Apindo, Indonesian food and beverage association Gapmmi and several plastics associations including Aphindo, Giatpi and Abofi have opposed or sought delays in the import quota mandate, mainly because of a lack of clarity in the application processes that could affect converters' operations later.

International business associations in Indonesia including the Korean chamber of commerce and industry Kocham, American chamber of commerce Amcham and the European chamber of commerce Eurocham have also undertaken similar courses of action.

The Indonesian trade ministry on 11 December last year announced that Indonesian PE and PP importers will need to apply for specific quotas to be able to import polymer resins from 10 March this year, or risk their cargoes getting rejected during customs clearance. A surveyor report is also required for resin imports. Importers can only begin their applications from 10 March.

Indonesian PE and PP buying interest and prices soared from late December until January, with importers stocking up for cargoes to arrive before the enforcement date. Spot polymer supplies in southeast Asia tightened in January because of unexpectedly higher Indonesian imports, which pushed up regional prices up, although higher feedstock costs also supported the price hikes.

The month-to-date average February southeast Asian duty-free LLDPE film price was at $1,065/t cfr southeast Asia, $79/t higher than average prices in December 2023.

The month-to-date February average of southeast Asian duty-free PP raffia prices was at $1,040/t cfr southeast Asia, $81/t higher than December 2023's average prices.

For a comparison, month-to-date February LLDPE film and PP raffia prices in the key Chinese market were at $935/t and $890/t cfr China respectively, only $7-9/t higher than December 2023's average prices.

Imports and domestic buying slows

Indonesian PE and PP import discussions have slowed down since early February as most exporters are not able to guarantee cargo arrivals before 10 March. Converters and distributors also experienced a rise in their inventories because of earlier stock-ups.

Southeast Asian PE and PP price hikes began slowing down in February because of weaker Indonesian import interest, while regional buyers are unwilling to secure supplies at current high prices, citing persistently weak downstream demand.

In the Indonesian domestic market, buying interest has also slowed down, with converters likely holding higher inventories.

Downstream PE and PP consumption in Indonesia has likely been high in January-February as converters have raised production of finished goods in anticipation of higher consumption during the recent general election in February and the upcoming Eid al-Fitr holidays in April. But converters are expected to reduce operating rates in March–April during the Islamic fasting month of Ramadan and Eid al-Fitr holidays in the first half of April.

Delay to help importers gain clarity

A delay or a grace period would likely allow Indonesian PE and PP importers and converters to achieve more clarity on the application procedures for the quota.

Such a delay would also lengthen the time for importers to apply for other licenses that would allow for imports without restrictions, although the application process is stringent and likely only attainable by large-scale converters with good company records, said local sources. Importers that have the Indonesian 'MITA' and 'AEO' import certifications as well as export-oriented converters can currently import polymer resins without applying for a quota. Importers with bonded warehouses could store their resin imports temporarily while they apply for import quotas.

PE and PP prices in Indonesia are therefore less likely to soar to the extent that was observed in January, after the mandate takes effect officially, with importers likely able to manage the circumstances better.

The stocking up of domestic PP supplies and unplanned cuts in local production have led to domestic prices soaring in Indonesia in the past two months. Import discussions that were halted in February because of tight delivery windows further widened the gap between domestic and import PP prices in the country.

But a delay in the import quota enforcement could possibly lead to domestic PP prices falling, especially for the commodity grades and regional PP import prices stabilising when Indonesia resumes imports.

Indonesia imported 749,000t of combined LLDPE and HDPE in 2023, more than 45pc of its annual consumption, according to Argus estimates. Import volumes increased by 21pc from 2022.

The country also imported 1.25mn t of PP in 2023, around 65pc of its annual PP consumption. But this import volume was lower by 5pc when compared with 2022.

By Yee Ying Ang

Southeast Asia, China LLDPE prices $/t

Southeast Asia, China PP prices $/t