Business Monitor: Indonesia’s petrochemical market remains relatively robust

JAKARTA (Rambu Energy) – Indonesia’s petrochemical markets will remain relatively robust this year, although on the economy in general will face external imbalance, with high inflation and rising borrowing costs.

In its latest report published late last week, Business Monitor International (BMI), said Indonesia’s growth and its market size, with a population of 240 million, continues to attract investment.

While a significant increase in petrochemicals capacities is expected over coming years, there remain significant risks, particularly the impact of new low-cost ethane-based petrochemicals production in the US and the differential between ethane and Indonesia’s principle feedstock naphtha, BMI said in its Indonesia Petrochemicals Report.

It said the market trends point to a less bullish short-term scenario than BMI had previously predicted, although Indonesia will remain a significant growth market in South East Asia over the medium term.

Indonesia’s petrochemicals market will not escape the effects of the country’s external imbalance, high inflation, and rising borrowing costs on economic activity, it said.

It noted that as the economic slowdown continues to play out, we have downgraded our 2013 real GDP forecast slightly to 5.7 percent (from 5.8 percent previously), and maintain our expectations for the rate of expansion to ease further to 5.4 percent in 2014.

“While the trends are placing petrochemicals demand under pressure, Indonesia’s market remains relatively robust and with local production unable to cover domestic demand the country will remain a significant net importer of petrochemicals products in Asia,” Business Monitor said.

Indonesia’s petrochemical industry seems to be in revival stage. Recently, state owned oil and gas company PT Pertamina inked a deal to set up a joint venture firm with PTT Global Chemical (PTTGC) of Thailand. Both parties agreed to set up a fully integrated petrochemicial complex, which is expected to start commercial operations in 2018.

The planned petrochemical project could include a 1 million tons per annum (mntpa) naphtha cracker with downstream capacities of 400,000 tons per annum (tpa) of polyethylene, 350,000 tpa of polypropylene and 200,000 tpa of polyvinyl chloride (PVC), which means margins will be closely related to crude prices.

The impact of ethane-based US petrochemicals on the Asian market may make the project uneconomic, BMI warns.

In other developments, which is also highlighted in the report, the restart of the TPPI complex in East Java in the fourth quarter of 2013 (Q413) after two years of being out of operation has added 550,000 tpa of paraxylene to national capacities as well as raising the local availability of naphtha by 2.8 millio barrels.

In BMI’s Asia Pacific Petrochemicals Risk/Reward Ratings (RRRs), Indonesia ranks 10th out of 12 countries with 51.8 points, unchanged since the previous quarter. It sits 10.2 points behind India and 9.5 points ahead of the Philippines.

“Plans for capacity expansion, coupled with improved risk, could raise the country’s rating, but BMI thinks it highly unlikely that it will close the gap with other Asian states,” it said.

Check Also

Chevron to buy Pasadena Refinery System for $350 mln

JAKARTA (RambuEnergy.com) - Chevron U.S.A. Inc. (CUSA), a wholly owned subsidiary of Chevron Corporation (NYSE: ...

Leave a Reply

Your email address will not be published. Required fields are marked *