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Development of polypropylene (PP) resin industry in Indonesia.

Backgrounds

Development of Polypropylene polypropylene (pŏl'ēprō`pəlēn), plastic noted for its light weight, being less dense than water; it is a polymer of propylene. It resists moisture, oils, and solvents.  (PP) industry depends partly on the characteristics of petrochemical industry, which in turn depends on the supply and prices of oil as the main feedstock feed·stock  
n.
Raw material required for an industrial process.

Noun 1. feedstock - the raw material that is required for some industrial process
raw material, staple - material suitable for manufacture or use or finishing
.

The PP industry depends on the availability of basic materials. The production capacity of the country PP industry has remained unchanged from 605,000 tons per year in the past decade. The country has three PP producers PT. Tri Polyta Tri Polyta is an insolvent Indonesian chemicals manufacturer, which has acquired some notoriety in investment circles due to its default on a large 1996 bond issue, and its success in persuading a court in Indonesia to protect it from the enforcement of its bond obligations.  Indonesia, PT. Polytama Propindo and PT. Pertamina. The producers have planned capacity expansion to meet the domestic requirement. PT. Polytama Propindo plans to increase its capacity by 160,000 tons this year, PT. Tri Polyta Indonesia plans capacity expansion by 120,000 tons in 2011.

Until now, there is still imbalance between supply and demand for PP. The country's PP production totaled 561,346 tons in 2008 up 6.9% to 600,000 tons in 2009. In 2009, TPI (Tracks Per Inch) The measurement of the density of the storage channels on a disk or tape. Track density on magnetic disks has reached 125,000 tpi (125 Ktpi). See bpi, areal density and magnetic disk.  succeeded in increasing sales 17% from 330,500 tons in 2008 to 385,700 tons in 2009. The domestic PP market began to improve in 2009 from the slump in 2008.

The country's PP consumption was around 800,000 tons in 2009. The PP consumption is expected to rise in this year and in the following years with growing demand from plastic industry. However, there are a number of factors discouraging or hampering plans for capacity expansion to meet the growing demand such as scarcity in supply of the feedstock propylene propylene /pro·pyl·ene/ (pro´pi-len) a gaseous hydrocarbon, CH3CHdbondCH2.

propylene glycol  a colorless viscous liquid used as a humectant and solvent in pharmaceutical preparations.
. The country still needs to import 30% of its propylene requirement.

In addition with the full implementation of AFTA, imported products of PP from Thailand and Malaysia will be another major factor discouraging capacity expansion by local producers. With 0% import duty imported products would be more competitive. The two neighboring neigh·bor  
n.
1. One who lives near or next to another.

2. A person, place, or thing adjacent to or located near another.

3. A fellow human.

4. Used as a form of familiar address.

v.
 countries already have large exportable surplus of PP. Meanwhile, China is still need large imports of PP every year, therefore, that country also needs large supply of propylene to produce PP.

The association of plastic, aromatics and olefin olefin (ō`ləfĭn) or olefin series: see alkene.
olefin
 or alkene

Any unsaturated hydrocarbon containing one or more pairs of carbon atoms linked by a double bond (see
 industries (INAplas) has asked the government to postpone implementation of AFTA until 2015. The association has also called for the postponement of the ASEAN-China Free Trade Agreement and FTA with other countries including India, Korea, Japan and Australia and New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland.  as the domestic industries are not yet ready for competition.

Classification and Tariff Code of Polypropylene
Tariff classification of Polypropylene

Polypropylene Resin (PP)         Tariff Code (HS)

PP resin Homopolymer :
--In other liquid forms            39.02.10.190
--In granules                      39.02.10.200
--In other forms                   39.02.10.900
PP resin Copolymer :
--In dispertion or solution        30.02.30.110
--In other liquid forms            39.02.30.190
--In Granules                      39.02.30.200
--In other forms                   39.02.30.900


Industrial structure

Characteristics of product

Polypropylene (PP) resin is a midstream mid·stream  
n.
1. The middle part of a stream.

2. The part of a course that is neither at the beginning nor at the end: the midstream of life.

Noun 1.
 petrochemical product, a derivative of olefin centre produced from propylene polymerization polymerization

Any process in which monomers combine chemically to produce a polymer. The monomer molecules—which in the polymer usually number from at least 100 to many thousands—may or may not all be the same.
 of process. Propylene is a derivative of naphtha naphtha (năp`thə, năf`–), term usually restricted to a class of colorless, volatile, flammable liquid hydrocarbon mixtures.  or natural gas produced through cracking of hydrocarbon molecules. PP is used a feedstock for various types of plastic products different in the process of crystallization Crystallization

The formation of a solid from a solution, melt, vapor, or a different solid phase. Crystallization from solution is an important industrial operation because of the large number of materials marketed as crystalline particles.
, purity, rigidity and melting points.

PP, therefore, could be used as substitute for a number of other polymer products such as polyethylene (PE), wood fiber, natural fiber and certain metal. PP consists of three types--Homo-polymer Propylene, Random copolymer copolymer: see polymer.  (propylene-ethylene) and Random polymer (propylene-ethylene-butene).

Copolymer PP is formed from propylene with the addition of other monomers in small proportion (1%-7% ethylene ethylene (ĕth`əlēn') or ethene (ĕth`ēn), H2C=CH2, a gaseous unsaturated hydrocarbon. It is the simplest alkene. ) to turn out tough product resistant to collision. This type of PP is used for durable gods such as electrical equipment, household wares and parts of car body. It is also sued for other applications such as printed materials, films and lamination lamination

a laminar structure or arrangement.
.

Addition of butene bu·tene  
n.
Any of several forms of butylene.



butene  

See butylene.

Noun 1. butene - any of three isomeric hydrocarbons C4H8; all used in making synthetic rubbers
 to PP could change the characteristics of PP. Normally the result of the mixture is used as a layer to absorb heat on PP films. PP could also be changed through the process of compounding. The process is made with addition of a small portion of additive in the polymer already melted. The additive could be rubber, filler, material that could increase resistance and materials to stabilize ultra violet ray that the polymer is durable for out door use.

Capacity stagnant, production growing 3.4% per year

In the period of 2005-2008 the country's PP production capacity remained unchanged from the level of 605,000 tons per year. There was no capacity expansion mainly because of the scarcity in supply of propylene as the feedstock.

Meanwhile, the domestic production grew 3.4% a year from 525,915 tons in 2005 to 600,000 tons in 2009.

PT. Tri Polyta Indonesia (TPI) succeeded in increasing its PP production to 460,000 tons in 2009, from 360,000 tons in the previous year. In increasing the production, TPI set aside US$25 million for capital spending capital spending

Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years.
. The fund was used to buy new machines to improve productivity of its factory in Cilegon, Banten.

The PP products of TPI vary to meet domestic demand including for plastic bag, carpet and house ware industries.

Tri Polyta the largest producer

The country has three producer of PP including PT Tri Polyta Indonesia, PT Polytama Propindo and PT Pertamina (Plaju).

PT Tri Polyta Indonesia

PT Tri Polyta Indonesia (TPI) which came on stream in 1992 in Cilegon, Banten, is the largest PP resin producer in Indonesia. The company uses the technology of Gas UNIPOL developed by Union Carbide Union Carbide Corporation (Union Carbide) is one of the oldest chemical and polymers companies in the United States, and currently has more than 3,800 employees.  Corporation and Shell Chemical Company, TPI started operation in 1992 with two production lines and production capacity of 200,000 tons per year.

In 1995, a third production line came on stream increasing its production capacity to 360,000 tons per year.

The original composition of shareholders of TPI was as made up of PT Bima Kimia Citra (31.22%) of the Bimantara Group, Prayogo Pangestu (8.51%), Commerzbank (SEA) Ltd. (7.08%), Henry Pribadi (6.73%), Ibrahim Risjad (5.31%), Wilson Pribadi (3.89%), Johny Djuhar (2.13%), Henry Halim (0.71%) and the public (34.42%). In June 2001, PT Bima Kimia Citra and Henry Pribadi sold their stakes.

In December, 2003, the composition of shareholders consisted of Prajogo Pangestu (46.46%), Commerszbank(SEA) Ltd. (7.08%), Ibrahim Risjad (5.31%), Wilson Pribadi (3.89%), Johny Djuhar (2.13%), Henry Halim (0.71%) and the public (34.42%).

The products of TPI are the types of PP resin including homo-polymer, Random Copolymer and Block Copolymer, al with the brand of Trilene.

The products are used for films, Injection Moulding, Sheet thermoforming, yarn and fiber multifilament, etc.

In 2009, TPI succeeded in posting a 17% increase in sales to 385,700 tons from 330,500 tons in 2008, although its income fell slightly 5% to Rp 4.74 trillion from Rp 4, 988 billion in 2008.

However, the performance of TPI was quite impressive with net profit at Rp 483 billion as against a net loss of Rp14 billion in 2008. TPI gained from the falls in the prices of petrochemical products and derivatives. The fall in the selling prices came at the same time with the declines in the prices of basic materials.

In 2010, TPI plans to expand its production capacity to 480,000 tons from 360,000 tons a year with an investment of US$ 28 million. The capacity expansion started in January and is expected to start commercial operation at the end of the first quarter of 2011. The de-bottlenecking project will strengthen the competitiveness of TPI on the domestic PP market, which continues to grow by 4%-5% per year.

TPI has number contract buyers in the country including PT Argha Karya Prima Industri, PT Trias Sentosa Tbk, PT Indopoly Swakarsa Industry and PT Titan Kimia Nusantara. TPI could sell around 15%-20% of total production of polyethylene.

PT Polytama Propindo

PT Polytama Propindo is the second largest producers of PP resin in Indonesia with a production capacity of 180,000 tons in 1996 and in 2005 its production capacity was expanded to 200,000 tons.

PT Polytama Propindo is located Balongan, Indramayu, and West Java near the Pertamina's Exor 1 oil refinery, which supplies propylene for PT Polytama Propindo.

PT Polytama Propindo is a joint venture established by PT Tirtamas Majutama (80%), which is owned by tycoon Hashim S. Djoyohadikusumo and Nissho Iwai Corp. of Japan (10%) and BP Chemical Co. of Britain (10%). In mid 2008, PT. Polytama suspended operation as it underwent routine overhaul to coincide with the overhaul of a number of machines of the refinery of PT Pertamina in Balongan. The process of overhaul was completed in December 2008.

In 2010, PT. Polytama plans expansion of its capacity by 160,000 tons per year, from 280,000 tons to 440,000 tons. The project is estimated to cost US$ 20 million.

The new production facility is expected to start operation in July 2010 reducing the deficit in the domestic supply of PP currently around 300,000-350,000 tons. According to according to
prep.
1. As stated or indicated by; on the authority of: according to historians.

2. In keeping with: according to instructions.

3.
 INAplas, the country needs around 700,000-800,000 tons of PP plastic per year.

PT Pertamina--Plaju

The Polypropylene plant of Pertamina in Plaju South Sumatra South Sumatra or Sumatera Selatan is a province of Indonesia. It is on the island of Sumatra, and borders the provinces of Lampung to the south, Bengkulu to the west, and Jambi to the north.  was built in 1971 with a production capacity of 20,000 tons per year. In 1994 its capacity was expanded to 45,000 tons per year.

Pertamina Plaju receives supply of feedstock in Raw Propane propylene from FCCUS refinery, Sungai Gerong, South Sumatra. The products of Pertamina Plaju is Polytam / Polypropylene pellet (plastic ore) which is produced through polymerization of propylene gas with modification of several additives including antioxidant antioxidant, substance that prevents or slows the breakdown of another substance by oxygen. Synthetic and natural antioxidants are used to slow the deterioration of gasoline and rubber, and such antioxidants as vitamin C (ascorbic acid), butylated hydroxytoluene , stabilizer stabilizer: see airplane. , lubricant Lubricant

A gas, liquid, or solid used to prevent contact of parts in relative motion, and thereby reduce friction and wear. In many machines, cooling by the lubricant is equally important.
, anti-block and slip agent.

Applications of the product of Pertamina Plaju include:

Polytam Film, for:

--basic material for plastic bags for food, vegetables, fruits and bread

--Tubular film

--Cast film

Polytam Yarn, for:

--basic material of plastic bags

--Strapping band, plastic rope, straw

Polytam Injection, for:

--Plastic house ware

--Automotive components

--Food and medicine equipment

--Toys

PT. Petamina plans expansion by building PP plant in Balongan, Indramayu. In 2008, Pertamina already signed EPC (1) (Entertainment PC) See HTPC.

(2) (Electronic Product Code) A standard code for RFID tags administered by EPCglobal Inc. (www.epcglobalinc.org).
 contract with PT Rekayasa Industri and Toyo Engineering Corp to convert gas waste from the Balongan refinery into propylene.

Pertamina has secured a loan of US$225 million to finance the PP factory development in Balongan from a Japanese syndicate of Sumitomo Mitsui Banking Corporation
''For other uses, see Smbc (disambiguation).


Sumitomo Mitsui Banking Corporation (SMBC, Mitsui Sumitomo Ginkō, 三井住友銀行) is a Japanese bank based in Tokyo, Japan.
 (SMBC SMBC Sumitomo-Mitsui Banking Corporation
SMBC Stockport Metropolitan Borough Council (UK)
SMBC South Main Baptist Church
SMBC Single Mother by Choice
SMBC Stowe Mountain Bike Club (Stowe, VT) 
), BNP Paribas BNP Paribas (Euronext: BNP, TYO: 8665 ) is one of the main banks in Europe and France. It was created on 23 May 2000 through the merger of Banque Nationale de Paris (BNP) and Paribas. , and HSBC HSBC Hongkong and Shanghai Banking Corporation
HSBC Humane Society of Broward County (Florida)
HSBC Humane Society of Bay County (Bay County, Michigan) 
. The risk is covered by Nippon Export and Investment Insurance (NEXI NEXI Nippon Export and Investment (insurance) ) from Japan.

Supply of propylene basic material

Supplies of propylene in Indonesia come from PT Chandra Asri with a production capacity of 280,000 tons of propylene in Cilegon, Banten; and Pertamina's refinery in Balongan, Indramayu (EXOR 1) which has a production capacity of 280,000 tons per year.

Apart from the Balongan refinery supplying propylene for PT Polytama Propindo, Pertamina also supplies propylene for its polypropylene plant in Plaju from its Sungai Gerong refinery in South Sumatra.

Supply from Chandra Asri

Chandra Asri Olefin Centre has a cracking facility to decompose de·com·pose  
v. de·com·posed, de·com·pos·ing, de·com·pos·es

v.tr.
1. To separate into components or basic elements.

2. To cause to rot.

v.intr.
1.
 hydrocarbon into C2 and C3 using the technology of Lummus Crest of he United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . The cracking facility was designed to process heavy naphtha, light naphtha and Liquefied Petroleum Gas liquefied petroleum gas or LPG, mixture of gases, chiefly propane and butane, produced commercially from petroleum and stored under pressure to keep it in a liquid state.  (LPG LPG: see liquefied petroleum gas.

1. LPG - Linguaggio Procedure Grafiche (Italian for "Graphical Procedures Language"). dott. Gabriele Selmi. Roughly a cross between Fortran and APL, with graphical-oriented extensions and several peculiarities.
).

Apart from producing Ethylene and Propylene, Chandra Asri produces Polyethylene, with a production capacity of 300,000 tons and Pyrolysis py·rol·y·sis
n.
Decomposition or transformation of a chemical compound caused by heat.


pyrolysis (pīrol´isis),
n
 gasoline with a production capacity 210,000 tons

Chandra Asri also has two facilities to produce Polyethylene (PE) resin one using the US Unipol technology with a production capacity of 200,000 tons and another using Japan's technology of Showa Denko with a production capacity 100.000 tons

One important facility of Chandra Asri is Sea Water Cooling Water cooling is a method of heat removal from components. As opposed to air cooling, water is used as the heat transmitter. Water cooling is commonly used for cooling internal combustion engines in automobiles and electrical generators.  system, a system that could reduce the temperature by 1,000 degrees Celsius when the process of cracking to Cyrogenik Storage by pumping 60,000 m3 of sea water with high pressure every hour.

A 54 megawatt meg·a·watt  
n. Abbr. MW
One million watts.



mega·watt
 power plant has also been built to support the process of production.

PT Tri Polyta Indonesia increases imports of Propylene

PT Tri Polyta Indonesia (TPI) receives supply of propylene from Chandra Asri in addition to imports. As the country's largest producer of polypropylene (PP), TPI needs guarantee in supply of the basic material through contract with PT. Chandra Asri.

In 2006, its purchase of propylene from Chandra Asri dropped to the lowest ever at 227,190 tons, at a price of US$1,009 as Chandra Asri cut production during maintenance of its production facility.

Meanwhile, the price of propylene he Asian market continued to scale up in 2006 to follow the soaring price of oil hat reached US$ 80 per barrel in the third quarter of that year.

Amid the rising price reaching US$1,221 per ton, TPI had to increase imports of the basic material to 71,150 tons, from only 25,764 tons in 2005.

In 2009, propylene needed by Tri Polyta was partly or 300,000 tons supplied by PT Chandra Asri and imports rose to 80,000 tons.

Projection of production capacity

With the capacity expansion by producers, the country's production capacity for PP will rise to 765,000 tons in 2010. The additional capacity will come from PT. Polytama Propindo 160,000 tons bring its total capacity to 440,000 tons per year from 280,000 tons.

In 2012, the country's PP production capacity is expected to rise further to 885,000 with addition of 120,000 tons from PT. Tri Polyta Indonesia. The capacity is expected to remain unchanged until 2014.

With capacity utilization Capacity Utilization measures the rate at which a firm makes use of their capital productive capacities, such as factories and machinery. Capacity Utilization generally rises when the economy is healthy and falls when demand softens.  of around 80%-90%, the country's PP production could still be increased. It is predicted than in 2014, the industry will reach its full capacity unless there is new producer or capacity expansion.

In 2010, TPI set production target at 370,000 tons, lower than last year's level of 385,700 tons.

Investment reviving

Rising trend in demand prompted producers to expand capacity.

PT. Polytama Propindo plans expansion of production capacity to 440,000 tons per year from 280,000 tons per year. The capacity expansion project will cost around US$20 million to be completed later this year.

PT Tri Polyta Indonesia Tbk (TPI), the largest PP producer also plans capacity expansion from 360,000 tons to 480,000 tons per year. The company, therefore will need 506,000 tons of propylene a year for the PP capacity expansion. The project will cost around US$ 8 million.

The capacity expansion project is to be completed in 2012. With the operation of the new production facility, TPI hopes to reduce by as much as 5%-6% of the production cost.

With the expansion, TPI will need additional supply of at least 126,000 tons of propylene a year to be supplied by Pertamina. Currently Pertamina plans Blue Sky program that to catch waste gas from its refinery in Balongan and Cilacap to be processed into propylene. Propylene is a compound produced through the process of RCC RCC - An extensible language.  (residue catalytic cracking).

Apart from propylene, the RCC process also turns out LPG gas, poly gasoline (mogas and RON 98), naphtha (RON 92), LCO LCO Lac Courte Oreilles (Wisconsin Native American Tribe)
LCO Levine Communications Office (PR firm; Los Angeles, CA, USA)
LCO Light Cycle Oil
LCO Life Cycle Objectives
 (light cycle oil), and DCO DCO Demande Chimique En Oxygène (French)
DCO Digitally Controlled Oscillator
DCO District Coordination Officer (Pakistan)
DCO Defence Community Organisation (Australia) 
 (decant de·cant  
tr.v. de·cant·ed, de·cant·ing, de·cants
1. To pour off (wine, for example) without disturbing the sediment.

2. To pour (a liquid) from one container into another.
 oil). The Blue Sky program will likely produce around 100,000- 150,000 tons of propylene per year.

Imports of PP resin growing

Homo-polymer is the type that has dominated the country's imports of PP resin. Homopolymer PP resin has wide range of applications. It could be used as feedstock to produce plastic films, Injection Moulding, Sheet Thermoforming, Yarn and Fiber multifilament. Copolymer PP resin is generally used as feedstock for electrical components, household equipment and car bodies.

Imports of PP resin peaked at 373,000 tons in 2008. Imports are dominated by Homopolymer in the form of granules Granules
Small packets of reactive chemicals stored within cells.

Mentioned in: Allergic Rhinitis, Allergies
, which accounted for 218,000 tons, followed by Copolymer PP resin in granule granule, in astronomy: see photosphere.  accounting for 135,000 tons.

In 2009, imports of PP resin fell to 325,188 tons including homopolymer in granule which made up 323,341 tons (90.4%) of the total imports with other forms making up 30,863 tons (9,2%), and 1,847 tons (0,4%) in the form of Copolymer Propylene in liquid.

The potential market has prompted world producers planning to boost exports of that material to the country. From 2005 to 2009, Singapore was the largest supplier of PP resin for Indonesia. In 2006, imports of PP resin from that country peaked at 89,114 tons, up 18.3 % from 75,342 tons in 2005.

Following Singapore was South Korea although imports from which declined in the past several years with Japan the third largest.

Floods of imports

With the ASEAN ASEAN: see Association of Southeast Asian Nations.
ASEAN
 in full Association of Southeast Asian Nations

International organization established by the governments of Indonesia, Malaysia, the Philippines, Singapore, and Thailand in
 China Free Trade Agreement (ACFTA ACFTA ASEAN-China Free Trade Area ) effective as from January this year, there has been growing concern that the local producers of plastic goods would lose their foothold on the domestic market. Large imports are feared to soon flood the domestic market causing marketing problem for local producers. Local producers, therefore, asked for the postponement of the agreement for three years. Apparently the government would not bow to the demand.

Based on data from INAplas, PP products from other Asean countries imported by Indonesia reached 180,484 tons in 2008 or 48% of the country's total imports. The imports are predicted to climb to 198,097 tons in 2010.

Imports, therefore, are expected to come in floods from Malaysia and Thailand, which have surplus in production. Thailand has just completed the construction of a new factory although its old producers already have excess in production capacity. Thailand is expected to be able to sell its product at cheaper price as it has integrated facility producing also the basic material for PP resin.

Meanwhile INAplas said total imports of PP are predicted to rise 44.6% to 340,000 tons in 2010 as a result of the ASEAN CEPT CEPT - Comite Europeen des Postes et Telecommunications  that scraps the import duty as from this year.

Indonesia's Exports of PP resin

Indonesia's exports of PP resin are relatively small as production is designed only for domestic consumption.

In 2006, the country's exports of PP resin reached 11,707 tons, valued at US$ 10,694 or an increase of 19% from 9,829 tons in the previous year. It the largest exports so far

In 2008, exports rose again 11,236 tons, but fell in 2009 by 18.6% to 9,473 tons.

China is still the largest country of destination for PP resin exports from Indonesia. In 2006, exports to China reached 3,955 tons or the largest in the past five years. The second largest country of destination is Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov.  to which exports average 1,800 tons per year.

In the past 2-3 years the prices of PP resin in the world market including in Asean, increased with the scarcity of propylene basic material supply. The increase in the PP prices boosted exports of polypropylene from Indonesia.

Consumption of PP resin

The domestic consumption of PP resin in the period of 2005-2008, grew 5.4% per year--from 746,659 tons in 2005 to 923,435 tons in 2008.

The increase in consumption was also marked with an increase in imports of PP resin. The increase in consumption followed growing demand from plastic industry using it as the feedstock.

Projection of PP resin consumption

The improved condition of the world economy in 2010 is expected to result in the revival of the manufacturing industry including plastic industry especially plastic food package, plastic bottle, plastic bag and plastic house ware industries. The revival of the industries will require larger supply of PP resin as the feedstock.

Therefore, consumption of PP resin in 2010 is forecast to rise to 965,000 tons and to 1,283,000 tons in 2014.

The domestic consumption of PP resin is projected to remain relatively small with the high price of that material in international market. The price of P resin is still too high despite the oil price fall to US$ 70 per barrel in May 2010 from US$ 80 in the third quarter of 2009.

In addition, the local producers of PP resin are already operating almost at full capacity, therefore, they could not increase supply for domestic consumption. Meanwhile, demand for PP resin on the domestic market has increased.

Some producers have planned capacity expansion to meet growing demand. PT. Tri Polyta Indonesia and PT. Polytama Propindo plan to expand their production capacity respectively by 120,000 tons and 160,000 tons per year. Implementation of the plan, however, would not be easy with the scarcity of supply of feedstock propylene. The country still depends on imports for 30% of its propylene requirement. The cost of imports would cause an increase in the production cost.

The main consumers of PP resin in Indonesia are producers of plastic films, plastic yarns, and for injection moulding

Based a survey by PT Data Consult, 40.8% of PP resin consumption in Indonesia is for plastic film industry to produce material for food packages cigarette packages, adhesive tape, etc. Around 27.8% is used for plastic bags and sacks and around 20% by injection moulding industry that produces household utensils and automotive components.

Delta P US$ 328 in 2009

Delta P is a petrochemical term showing the margin between the selling prices of polypropylene per ton and purchasing price of propylene per ton. Delta P is used to calculate profit as the cost of purchasing Propylene makes up 80% of the cost of goods sold Cost of goods sold

The total cost of buying raw materials, and paying for all the factors that go into producing finished goods.


cost of goods sold 
 for polypropylene.

Other components of cost contributing to the selling price of polypropylene include conversion cost, which is he cost of converting propylene into polypropylene, such as the use of catalyst, additives, electricity, fuel, spare parts Spare parts, also referred to as Service Parts is a term used to indicate extra parts available and in proximity to the mechanical item, such as a automobile, boat, engine, for which they might be used.

Spare parts are also called “spares.
, maintenance, general costs, personnel cost, packaging , depreciation, etc.

In 2007, the price of polypropylene was US$ 1,100 per ton Asia spot market and the price of propylene was US$ 1,304 per ton. Therefore, the Delta P that year was US$ 204 per ton.

In 2008, the Delta P was US$ 157 per ton, with the price of polypropylene at US$ 1,357 and that of propylene US$ 1,200 per ton.

In 2009, the Delta P rose to US$ 328 with the price of propylene rising to US$1,072. The PP price hike followed the rising price of oil in the world market.

Meanwhile, the price of plastic wrapper A data structure or software that contains ("wraps around") other data or software, so that the contained elements can exist in the newer system. The term is often used with component software, where a wrapper is placed around a legacy routine to make it behave like an object.  in the form of plastic sheet and films (biaxially-oriented polypropylene /BOPP) on the domestic market surged 28.3% on scarcity in supply of basic material in the form of polypropylene (PP).

Meanwhile, flexible package producers said the prices of plastic sheet and BOPP film in 2009 were around US$ 1.52 per kg. In April the price surged to US$ 1.95 per kg.

PP resin marketing and distribution

Marketing

The oil price hike brought on an increase in the prices of naphtha, and in turn caused an increase in the price of propylene in Asia and world markets.

The supply and demand in the market of polypropylene in the country, therefore, will not be determined only by domestic factors but mainly by development sin the world market.

Production and market of PP resin and olefin products are controlled by large multi national companies. They set prices not on local condition but more on regional and world condition. Generally multinational companies have integrated facilities from upstream to downstream sectors that they operate more efficiently.

The increase in the price of polypropylene in Indonesia follows the rise in the price of polypropylene in Asian market. In 2008, the price of polypropylene in Asia was set at US$ 1,468 per ton as against US$ 1,357 per ton in Indonesia. In 2009, the price of polypropylene in Asia was US$ 1.006 per ton slightly higher than the price in Indonesia at US$ 1.400 per ton.

Distribution

The three producers of polypropylene in Indonesia PT Tri Polyta Indonesia, PT Polytama Propindo and PT Pertamina Plaju--each has distributors or sales agents.

PT Tri Polyta which uses the brand of Trilene has three distributors PT Akino Wahana Indonesia, PT Bukitmega Masabadi and PT Juta Dharma dharma (där`mə). In Hinduism, dharma is the doctrine of the religious and moral rights and duties of each individual; it generally refers to religious duty, but may also mean social order, right conduct, or simply virtue.  Persada.

Each of the distributors has separate distribution areas. In potential markets like the Greater Jakarta area, West Java and East Java East Java (Indonesian: Jawa Timur) is a province of Indonesia. It is located on the eastern part of the island of Java and also includes neighboring Madura and Bawean islands. , PT Tri Polyta Indonesia has more than one distributor. They include PT Akino Wahana Indonesia and PT Bukitmega Masabadi.

PT Polytama Propindo known with the brand of Masplene, has three distributors PT Bukitmega Masabadi, PT Polymer Spectrum Sentosa and CV Tara Utama.

One of the distributors of PT Polytama Propindo, CV Tara Utama is no longer active after its performance continued to decline in the past seven years.

Unlike the two other producers, Pertamina uses no main distributor. Instead it uses sales agents to handle the distribution of its PP resin.

The agents are named according to the Marketing Units and are responsible for the distribution in certain area. Each Marketing Unit has a number of agents.

Prospects and Conclusion

* Based on the production figures in 2005-2009, the country's PP production rose 3.4% per year.

* Singapore is the largest supplier of polypropylene for Indonesia, while China remains the country of destination for PP export from Indonesia.

* Based on consumption in the 2005-209 period, and production , imports and exports during that period, Indonesian consumption of polypropylene in 2010 is predicted to rise to reach the level of consumption in pre crisis period --rising 5.4% per year.

* PP resin consumption in 2014 is predicted to reach 1.283 million tons, much exceeding the production capacity of the existing producers at 650,000 tons per year. Capacity expansion, therefore, needs to be planned from now.

* Capacity expansion is already made or planned by local producers. The country's production capacity will increase this year with expansion by PT. Polytama Propindo by 160,000 tons this year. Meanwhile, PT. Tri Polyta plans capacity expansion by 120,000 tons in 2011. Implementation of the plan, however, is still doubted with his scarcity of feedstock supply in propylene. The availability of propylene is the main factor to be considered in planning capacity expansion or construction of new PP factory.

* The price of polypropylene on the domestic market is determined on price developments in the region or the world, although the increase in the domestic price has been higher than in the regional and international markets in the past several years.
Table--1
PP resin production capacity and production, 2005-2009

Year              Production   Growth    Production   Growth
                   capacity      (%)       (Tons)       (%)
                    (Tons)

2005               605,000       --       525,915       --
2006               605,000        0       535,750       1.9
2007               605,000        0       549,144       2.5
2008               605,000        0       561,346       2.2
2009               605,000        0       600,000       6.9
Average growth                                          3,4

Source: Industry ministry

Table--2
Producers and capacity, 2009

 Companies      Location     Process of   Number of    Capacity   Start
                             technology   production    (tons/     up
                                            lines       year)

PT Pertamina    South.       Mitsui           1         45,000    1974
(Plaju)         Sumatra

PT Tri Polyta   Cilegon,     UCC Unipol       3        360,000    1992
Indonesia       Banten

PT Polytama     Indramayu,   Himont           1        200,000    1995
Propindo        West Java    Sphiripol

Total                                                  605,000

Source: Industry ministry , ICN

Table--3
Production capacity of Chandra Asri's Olefin Centre

Types of products            Production capacity (tons)

Ethylene                              600,000
Propylene                             280,000
Polyethylene (Unipol)                 200,000
Polyethylene (Showa Denko)            100,000
By Product :
Pyrolysis Gasoline                    210,000

Source: Chandra Asri

Table--4
PT Tri Polyta Indonesia's consumption of propylene and price,
2006-2009

Year                           Suppliers

              Chandra Asri                  Imports

        Volume     Average price    Volume    Average price
        (Tons)        US$/Tons      (Tons)       US$/Tons

2006     227,190            1,099    71,158            1,221
2009     300,000                     80,000

Source: TPI/ICN

Table--5
Projection of Production capacity, 2010-2014

         Projected Production
Year           capacity
            (000 Tons/year)

2010              765
2011              765
2012              885
2013              885
2014              885

Source: ICN

Table--6
Projection of PP resin Production, 2010-2011

Year          Projected Production
                   (000 Tons)

2010                  650
2011                  704
2012                  752
2013                  796
2014                  885

Source: ICN processed

Table--7
PP capacity expansion projects, 2010-2012

Companies               Production capacity     Investment     Start up
                         (000 tons/year)

PT. Polytama Propindo          160            US$ 20 million    2010
PT. Tri Polyta                 120            US$ 28 million    2012
Indonesia

Source : ICN processed

Table--8
Imports of PP resin by types, volume ands value, 2005-2009

Tons
US$ '000

Description                 2005       2006       2007

Homopolymer PP resin

PP in liquid or paste         342         66        500
                              324         44      1,138
PP in granule             129,420    123,872    136,961
                          131,683    149,419    174,368
PP in other forms          10,162      8,855        366
                           10,660     12,533        471
Sub Total                 139,924    132,793    137,827
                          142,667    161,996    175,977

Copolymer PP resin
Copolymer Propylene in         13          1        651
  other liquid forms           52          5        438
Copolymer Propylene        86,130    100,565    110,665
  in granule              106,204    130,541    155,101
Copolymer Propylene         4,506      3,025      9,009
  in other forms            6,048      4,497     12,711
Sub Total                  90,649    103,591    120,325
                          112,304    135,044    168,250
Total                     230,573    236,384    258,152
                          254,971    297,040    344,227

Description                 2008       2009

Homopolymer PP resin

PP in liquid or paste         561         --
                            1,964         --
PP in granule             218,724    292,478
                          353,085    315,310
PP in other forms           6,462     30,863
                           10,148     37,000
Sub Total                 225,747    323,341
                          365,197    352,310

Copolymer PP resin
Copolymer Propylene in        980      1,847
  other liquid forms        1,582      2,070
Copolymer Propylene       135,534         --
  in granule              214,173         --
Copolymer Propylene        11,064         --
  in other forms           16,895         --
Sub Total                 147,578      1,847
                          232,650      2,070
Total                     373,325    325,188
                          597,847    354,380

Source: BPS

Table--9
Exports of PP resin by type, volume, value 2005-2009

Tons
(US$'000)

Description              2005      2006      2007      2008      2009

Homopolymer PP resin
PP in liquid and         1,168     1,273        --        --        --
  past                     497       316        --        --        --
PP in granule            3,215     3,732     7,364     9,132     6,407
                         1,594     1,419     8,893    27,888    14,879
PP in other forms        4,440     5,652     1,737       387     1,031
                         6,718     7,189     3,804       868       687
Sub Total                8,823    10,657     9,101     9,519     7,438
                         8,809     8,924    12,697    28,756    15,566
PP resin Copolymer
Copolymer Propylene        632       644     1,002     1,714     2,032
  in granule               619       729     1,325     3,860     2,551
Copolymer Propylene        373       406       456         3         3
  in other forms           871     1,041     1,086         4         3
Sub Total                1,006     1,050     1,458     1,717     2,035
                          1.49      1.77     2.411     3.864     2.554
Total                    9.829    11.707    10.559    11.236     9.473
                        10.299    10.694    15.108    32.620    18.120

Source: BPS

Table--10
Domestic consumption of PP resin, 2005-2009

Year        Production   Imports    Export    Consumption   Growth (%)

2005           525,915    230,573     9.829       746.659         ---
2006           535,750    236,384    11.707       762.305          1.8
2007           549,144    258,179    10.559       796.764          4.5
2008           561,346    373,325    11.236       923.435         15.9
2009 (*)       600,000    325,188     9.473       915.715         -0.8
Average growth (%)                                                 5.4

Note: (*) prognosis 2009

Source: ICN processed

Table--11
Projected Consumption of PP resin, 2010-2014

>Year     Projected Consumption
              (000 Tons)

2010               965
2011             1,033
2012             1,100
2013             1,188
2014             1,283

Source: ICN processed

Table--12
Estimated consumption PP resin by end products

Types of Products    Products                 Estimate of   Percentage
                                              Consumption         (%)

Plastic Film         Food, vegetable,            311,020         40.8
                     fruit, bread and
                     snack packages,,
                     adhesive tape,
                     shopping bags etc.

Plastic Yarn         Woven bag, Plastic          211,920         27.8
                     rope, floor carpet,
                     straw , etc.

Injection Moulding   Household utensils,         152,461           20
                     electrical and
                     automotive
                     equipment, toys, etc.

Other                Plastic bottles,             86,904         11.4
                     plastic containers,
                     sanitary goods, etc.

Total                                                             100

Source: Industry ministry, Data Consult

Table--13
Delta P of Polypropylene industry, 2007-2009

Year             Price of            Price of        Delta P (US$)
              Propylene (US$)   Polypropylene (US$)

2007               1,100              1,304              204
2008               1,200              1,357              157
2009               1,072              1,400              328

Source: ICN

Table--14
Prices of polypropylene in Asia and Indonesia

(US$ per tons)

                   2007     %    2008      %      2009      %

Asia price         1,326    --   1,468    10.7    1,066    27.4
Indonesian price   1,304    --   1,357     4.1    1,400     3.2
Difference            22           111              334

Source: TPI, Data Consult

Table--15
Distributors of PP by producers and brands

Producers              Brands     Distributors

PT Tri Polyta          Trilene    PT Akino Wahana
                                  PT Bukitmega Masabadi
                                  PT Juta Dharma Persada

PT Polytama Propindo   Masplene   PT Bukitmega Masabadi
                                  PT Polymer Spectrum Sentosa
                                  CV Tara Utama (no longer active)

PT Pertamina-Plaju     Polytam    Marketing Units--UPMS I--VIII

Source: Data Consult
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Title Annotation:INDUSTRY
Publication:Indonesian Commercial Newsletter
Date:Apr 1, 2010
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