Tri Polyta poised to become largest polypropylene producer
Tri Polyta poised to become largest polypropylene producer
JAKARTA (JP): Tri Polyta Indonesia (TPI), buoyed by the recent
success of its international share offering, is confident of its
future as the largest single polypropylene plant in Southeast
Asia, according to the maiden issue of the Singapore-based Asian
Chemical News weekly magazine yesterday.
The weekly quoted Lloyd Lochra, TPI's vice president, as
saying that the company's offering of 7.47 million American
Depositary Shares, each representing 10 shares, was now trading
at a range of US$27-28, up from their July 21 listing of $21.
TPI brought its first two polypropylene trains on stream in
Serang, West Java, in August 1992 and construction of the third
train, which will be the country's first production of higher
value-added copolymer resins, is underway with the start of
commercial operations due in the third quarter of 1995.
The existing plant, which uses Unipol gas-phase technology,
was effectively debottlenecked at the end of 1993 by almost 35
percent, increasing the effective capacity to 215,000 tons a year
from 160,000 tons. The third reactor train will add another
105,000 to 120,000 tons a year at a cost of around $78 million.
Investors have been encouraged by strong expected growth rates
in polypropylene demand, given the fact that Indonesia's per
capita consumption of polypropylene is one of the lowest in Asia.
Total demand in 1993 was 355,000 tons, which was met by slightly
over 50 percent being imported.
The only other current domestic producer is the state-owned
oil company Pertamina, whose capacity of 6,000 tons a year is
being increased this year to 40,000 tons.
Demand
Despite the fact that this production, combined with TPI's,
brings the total domestic capacity in 1995 to beyond the existing
demand, TPI believes anticipated growth in domestic demand will
continue to exceed capacity in the foreseeable future.
A third polypropylene project is also underway, which will
involve production of 100,000 tons per year of polypropylene at
Balonan, due to start up at the end of 1995. This project,
involving a joint venture between local company Tirtamas
Majutama, BP Chemicals and Nissho Iwai, will involve a unit based
on Himont's Spheripol process. Although BP says the product is
primarily intended for the domestic market, TPI believes less
than 50 percent of this production will compete with it on the
local market.
Other licenses for polypropylene projects have been awarded by
the government but Lochra believes no other domestic facilities
are under development.
TPI points to the competitive advantage it gains from upstream
integration with PT Chandra Asri and downstream with affiliate PT
Argha Karya, which takes around eight percent of sales. Although
TPI is currently entirely dependent on imported supplies of
propylene feedstock, a $1.7 billion olefins complex which will
produce 250,000 tons a year of polymer grade propylene is under
construction at Chandra Asri, adjacent to the TPI plant and is
due on-stream in mid 1995.
The polypropylene producers intend to source a sizable portion
of its propylene requirements -- which will total 360,000-370,000
tons per year once the third train is on stream -- from Chandra
Asri, which has the same principal shareholders as TPI: the
Bimantara Group, Prajogo Pangestu of the Barito Pacific Group and
the Napan Group. This should allow a reduction in raw material
costs.
Imported propylene is currently subjected to a five percent
import duty, although it is likely to increase substantially upon
the commencement of Chandra Asri, which will be the first
domestic propylene producer. However, under tariff reforms
announced by the government in June 1994, TPI may be eligible for
a two-year reduction in, or exemption from, the tariffs on
propylene imported to meet expanded capacity from the third
train.
TPI's own polypropylene selling prices are also protected by
high tariffs on import. These currently amount to a 20 percent
tariff and 20 percent surcharge, which totals $313 per ton in the
year to June. As TPI's polypropylene prices generally reflect the
dollar levels of imported polypropylene plus the effect of the
tariff and duties, the tariff protection accounted to 36.5
percent of its sales in the first quarter this year. (vin)