Industrial Gas Prices Threaten to Breach US$20, Squeezing Indonesian Plastics Industry from All Sides
The national petrochemical and plastic industries are facing multi-layered pressure this year. The weakening of the Rupiah to nearly Rp18,000 per US dollar, a surge in global raw material prices, rising industrial gas prices, and a flood of cheap imported products from China have combined to erode the competitiveness of domestic businesses. This situation occurs while the industry is still struggling to maintain production levels and defend the domestic market from increasing imports.
Fajar Budiono, Secretary General of the Indonesian Olefin, Aromatic, and Plastic Industry Association (Inaplas), explained that gas is a vital component in the petrochemical industry, particularly in the cracking and polymerisation processes. According to him, as long as the Certain Natural Gas Price (HGBT) scheme remained around US$6-7 per MMBTU, the industry was relatively able to maintain competitiveness.
“With the previous HGBT, we were actually very much assisted because we could compete with imports, where our utilisation was supported by cheap gas at US$6-7. But now, the offers are above average, ranging from US$15 to even US$20,” said Fajar, as quoted from a written statement received on Friday.
This increase in energy costs comes at a time when regional competition is intensifying. In several ASEAN countries, industrial gas prices remain below US$9 per MMBTU. Meanwhile, Chinese producers enjoy the support of cheaper energy and greater raw material availability. Pressure from abroad is also increasingly felt through the surge in imports of plastic and petrochemical products. Goods from China are entering the domestic market at prices that are difficult for local producers to match.
“China’s presence is now very massive everywhere. For Indonesia, we estimate that goods from China could reach 300,000 tonnes per year,” said Fajar.
This situation is forcing domestic producers to sacrifice margins to defend their market share. Some factories have even begun adjusting utilisation levels to avoid greater pressure.
“In fact, we are now trying with 75% utilisation, attempting to stay slightly below China’s prices. Consequently, we are eroding our margins quite significantly,” he added.
On the other hand, exchange rate pressure makes the situation even more complicated. When the Rupiah weakens, the cost of importing raw materials increases. However, these cost increases cannot be fully passed on to selling prices because the market is flooded with cheap imported products.
“There are two issues. From the upstream industry side, we usually just pass through the costs. But with the flood of imported goods, we cannot pass through because we are forced to lower our prices,” he said.
This pressure is also felt by downstream industry players or converters who imported raw materials when prices were still high. When the goods arrived in Indonesia, market prices underwent a sharp correction, thereby squeezing business margins.
Concerns are now shifting from mere margin reduction to the threat of production slowdowns. If cost pressures continue, reducing working hours or laying off employees is an option that companies are beginning to consider.
“If this continues with the new prices above US$15, it is getting close. Previously, we anticipated that laying off employees was still far off,” said Fajar.
Meanwhile, Yusuf Rendy Manilet, a researcher at the Centre of Reform on Economics (CORE) Indonesia, assessed that the petrochemical industry is currently facing three major simultaneous pressures: the surge in global raw material prices, the weakening Rupiah, and the issue of industrial gas supply.
According to Yusuf, the conflict in the Middle East has driven naphtha prices to surge by more than 50% compared to before the tensions escalated. This condition is exacerbated by the weakening exchange rate, which increases the cost of importing raw materials and energy.
“The Indonesian petrochemical industry is currently facing three major pressures that are occurring simultaneously and reinforcing each other. First, global raw material prices are surging. Second, the Rupiah has weakened to around Rp18,000 per US dollar. Third, industrial gas prices, which were previously considered a buffer for competitiveness, are not yet providing full protection for industry players,” said Yusuf.
He noted that the main issue with industrial gas is not just the price stated in the HGBT policy, but the limited supply received by the industry.
“The actual realisation of HGBT gas allocation is still far from industry needs, so some companies must purchase regasified gas at prices that can reach almost three times higher,” said Yusuf.
As a result of this combination of pressures, the price of domestic plastic products has experienced a significant increase in recent months. However, the room to raise prices is increasingly limited because consumer purchasing power has not yet fully recovered.
“The impact is already visible from the increase in domestic plastic prices, which reached approximately 40-60% in April 2026,” he said.
Amidst the existing pressures, Yusuf believes that additional production capacity from new petrochemical complexes within the country could help reduce dependence on imports. Nevertheless, such improvements are not yet sufficient to address the structural issues of the industry.
“Policy focus should not only be on keeping gas prices low, but also on ensuring the availability of its supply,” he concluded.