Business Owners Request Zero Import Tariff on LPG, Plastic Raw Materials in Crisis?
Geopolitical unrest in the Middle East is beginning to impact domestic petrochemical industry players, particularly regarding raw material supplies. The high uncertainty is prompting businesses to adopt a cautious approach in reading market directions, especially for naphtha, which is the backbone of production.
Secretary General of the Indonesian Association of Olefin, Aromatic, and Plastic Industries (Inaplas) Fajar Budiono revealed that the current market conditions remain highly dynamic and difficult to predict.
Amid this situation, industry players hope the government can maintain raw material supply stability to prevent disruptions in production activities. A primary concern is the smooth distribution of naphtha, which is the main need for this sector.
“We hope the naphtha supply runs smoothly,” Fajar told CNBC Indonesia on Monday (30/3/2026).
Additionally, business players are starting to consider alternative raw materials such as LPG to ensure production continuity. However, this effort is deemed to require policy support to make it more competitive.
Compared to fiscal policies like relaxations, gas availability is considered more crucial for maintaining efficiency and competitiveness in the petrochemical industry amid global pressures.
“Zero per cent import duty on LPG as an alternative raw material. Gas supply,” Fajar said.
Pressure is also coming from the price side due to disrupted market balance. When supply decreases while demand remains high, price increases become an unavoidable consequence for industry players.
“If supply drops while demand stays the same, in economic theory, prices will definitely rise. So, increases in production costs are indeed unavoidable,” said INDEF Executive Director Esther Sri Astuti to CNBC Indonesia on Monday (30/3/2026).
On the other hand, the complex nature of the petrochemical industry makes raw material substitution options not feasible quickly or easily. This limitation further narrows adaptation space in the short term.
“It is not easy to find a naphtha substitute with the same specifications as what we have been importing from the Middle East,” she said.
Given this situation, she emphasised the importance of long-term strategies to reduce dependence on a single supply source. Diversification is seen as a key step to strengthen industry resilience.
“The key is not to rely on just one country. There must be a diversification scenario for raw material sources, while also strengthening domestic production capacity,” she stated.