The Indonesian trade ministry has withdrawn the enforcement of a mandatory import quota for most polyethylene (PE) and polypropylene (PP) grades, along with polystyrene, polyethylene terephthalate and monoethylene glycol, which was previously expected to take effect on 10 March.
The semi-official announcement was made during a conference by the trade ministry on 29 February, with market participants still waiting for an official statement.
Imports of PP co-polymers will still require an import quota, which has been in force for years, but an additional surveyor report is required from 10 March.
The trade ministry on 11 December last year announced that domestic 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. Importers could only begin their applications from 10 March.
The enforcement was earlier expected to be possibly delayed by at least three months, based on local associations' appeal requests to the trade ministry. The associations had mostly requested for a grace period to be given to PE and PP importers after the mandate took effect on 10 March.
Indonesia's PE and PP import dependency and the short-notice enforcement have led to objections by local and international associations, with disrupted resin supplies likely to cause a significant impact on the production and competitiveness of finished plastics goods.
The Indonesian Chamber of Commerce and Industry, 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 South Korean Chamber of Commerce and Industry, American Chamber of Commerce and the European Chamber of Commerce followed a similar course of action.
Indonesia imported 749,000t of combined liner low-density polyethylene (LLDPE) and high-density polyethylene in 2023, more than 45pc of its annual consumption, according to Argus estimates. Imports increased by 21pc from 2022. The country also imported 1.25mn t of PP in 2023, around 65pc of its annual consumption, but this was lower by 5pc against 2022.
Indonesian polymer import discussions have slowed since early February as most exporters are unable to guarantee cargo arrivals before 10 March, while importers' inventories grew.
The withdrawal of the import restrictions is expected to raise Indonesian PE and PP import interest in March. But imports are expected to resume slowly with key distributors and converters holding high inventories because of an earlier stockbuild.
Large-scale converters are likely well stocked for their consumption in March-April, while medium- to small-scale converters with limited storage could resume imports earlier.
Converters are also 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. Converters could take longer to consume their resin stocks as a result.
Tighter supplies add price support
The stocking up of domestic PP supplies, unplanned cuts in domestic production and restricted imports have led to higher prices in Indonesia during January–February. The imminent withdrawal of import mandates could lead to PP prices falling, especially for the commodity grades, because of converters and distributors' high inventories.
But regional PE and PP import prices are already far below Indonesian domestic prices, so the impact on import prices may be limited.
Regional PE and PP supplies are also expected to tighten during April–May because of maintenance shutdowns, which could balance the slowly returning demand in Indonesia and support prices.
Converters across southeast Asia are resisting current high PE and PP offers, citing weaker downstream demand. The return of Indonesian imports could help regional markets and prices to achieve some stability.
Argus preliminary southeast Asian duty-free LLDPE film prices were $1,060-1,100/t cfr southeast Asia on 1 March, $55/t higher from two months ago. Preliminary southeast Asian duty-free PP raffia prices were $1,050-1,070/t cfr southeast Asia on 1 March, $75/t higher compared with two months ago.
Chinese LLDPE film and PP raffia prices were $940-950/t and $910-920/t cfr China respectively on 1 March, rising by $5/t and $20/t respectively from two months ago.
