Plastic Factories Quietly Reduce Working Hours, a Step Towards Mass Layoffs?

Jakarta, CNBC Indonesia - A surge in imports of plastic raw materials from China, including polyethylene (PE), polypropylene (PP), polyvinyl chloride (PVC), and polyethylene terephthalate (PET), has hit the domestic market. These imported products are suspected of being sold at prices far below market value through dumping practices.

Fajar Budiyono, Secretary General of the Indonesian Olefin, Aromatic, and Plastic Industry Association (Inaplas), revealed that several companies have reduced factory operational hours to cut production costs. While this measure has not yet triggered layoffs in the upstream industry, supporting business activities have already begun to feel the impact.

“In the upstream industry, there have been no layoffs yet, but reductions in working hours have started to occur. What previously used a shift system has now changed to daily. If this condition continues, it could certainly lead to layoffs. Meanwhile, indirect labour such as loading and unloading, logistics, and other supporting companies have already started to experience reduced activity,” he told CNBC Indonesia on Wednesday (8/7/2026).

The pressure on the industry is considered to stem not only from the flood of imported products but also from the increase in gas prices, which is a major component of production costs. This situation forces industry players to consider efficiency measures to keep operations running amid continuously eroding competitiveness.

“The potential (for layoffs) is there, but it is still a long way off. For now, they will most likely lower their utilisation rate first. Previously, the downstream industry was still operating at between 60 to 65 percent utilisation. They will probably lower this to below 60. This means that if it falls below 60, they will first implement efficiency measures by reducing working hours. After that, if they cannot hold on, then there will be a reduction in the workforce or furloughs. But that is a long-term scenario. Hopefully, it will not come to that,” said Fajar.

Industry players are still trying to hold back efficiency measures to avoid workforce reductions. However, the room to survive is narrowing if energy costs continue to rise, especially after the gas price received by the industry has soared far above the specific natural gas price (HGBT) scheme that has been supporting the manufacturing sector’s competitiveness.

“But if the gas price is still set at 20 US dollars, then we are close to that point (layoffs). We initially anticipated that furloughing employees was still a long way off, but if this continues next month with a new price above 15 US dollars, then we are getting close,” said Fajar.

As long as they received the specific natural gas price (HGBT) facility, the industry was able to maintain competitiveness against the onslaught of imported products. However, this condition changed after the HGBT supply was restricted and businesses had to accept gas offers at much higher prices.

“With the HGBT, we were actually greatly helped because we could compete with imported goods, where our utilisation was as high as possible with a cheap gas price of 7 US dollars. But now, with the restriction on HGBT usage, the offers average above 15, even 20 US dollars,” he said.

The increase in gas prices is expected to directly burden production costs and narrow the industry’s room to compete, especially with producers from ASEAN countries and China that still enjoy lower energy costs. This situation raises concerns that domestic products will find it increasingly difficult to compete, both in the domestic and export markets.

“On average, the impact can be between 1 to 10 US dollars per metric ton on our selling price, depending on the industry, but the average is between 1 to 10 US dollars per metric ton added to our product selling price. This will certainly reduce competitiveness at a time when raw material prices are very volatile. Furthermore, when compared with ASEAN countries, we are also relatively losing out because their average gas price is still below 9 US dollars. So, with ASEAN alone, there will be a difference of approximately 2 to 10 US dollars. Not to mention China,” concluded Fajar.