More than a decade after its heyday, the plastics industry is struggling to survive as it deals with a decline in raw materials and a lack of government support, the Indonesian Olefin and Plastic Industry Association (Inaplas) said Wednesday.
Currently, upstream plastic makers annually produce a total of two million tons of plastic pellets, mostly made of polypropylene and polyethylene. These pellets are used to make plastic bags, bottles, packaging and containers.
The total production is, however, still lower than the country's total demand, which is projected to reach 2.4 million tons this year -- 850,000 tons of polypropylene, 650,000 tons of polyethylene and the remainder of other materials, including polystyrene and polyvinyl chloride (PVC).
To meet the demand, the downstream plastic industry imported 1 million tons of plastic pellets last year. Local demand for plastic pellets, which has gradually increased, is estimated to reach some 3.5 million tons by 2015.
"The increasing demand will result in a higher requirement for raw materials -- naphtha (an oil-based component) and natural gas," said Inaplas secretary-general Budi Susanto, at a seminar jointly held by the association and HSBC Indonesia.
"In the meantime, plastic pellet manufacturers need to import raw materials because the supply from local oil and gas producers -- especially from Pertamina -- is far from sufficient to meet their needs," he said.
"Raw material supplies remain a major problem because the government does not ensure that oil and gas producers allocate a percentage of their production for the industry," he said.
"Meanwhile, private oil and gas companies still prefer to export their products in order to gain higher returns."
Budi said the government needed to issue a regulation that requires local oil and gas producers to allocate a percentage of their naphtha for the country's plastic pellet producers. Otherwise, they will not be able to compete with cheaper imported products.
At present, the industry imports 900,000 tons of naphtha-based ethylene a year mostly from Singapore, South Korea and the Middle East.
The country's major plastic pellet producers include PT Chandra Asri Petrochemical Center, which produces ethylene, propylene and high density polyethylene; PT Tri Polyta Indonesia Tbk. and PT Polytama Propindo, which both produce polypropylene; and PT Titan Indonesia, which produces high density polyethylene and low density polyethylene.(06)
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