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Plastic film industry saved by export penetration. (INDUSTRY PROFILE).

Generally, technological advancements have been changing people's lifestyle more and more towards practicality and efficiency, and this also affects their choice of product packaging. In line with this, people also demand products with hygienic and aesthetic packaging. It can even be said that such packaging helps bring on their buying desire. Nowadays, how products, especially consumer goods, are packaged is one of the most important factors for a marketing success.

Until the outbreak of the economic crisis in mid-1997, the domestic consumption of plastic film, especially BOPP film, continued to grow rapidly not only because it was more price-efficient than other substitute materials such as cellophane film, kraft paper, and aluminum foil but also because BOPP film had some advantages over these materials. BOPP film has better resistance to pull, impact, temperature changes, and gas penetration than its substitute materials. In addition, BOPP film has a better appearance than its substitute materials, thanks to the converting and rotogravure printing technologies used in its production processes.

In 1998, when the crisis was at its peak, the domestic demand for plastic film plunged by 43.5% to 43,802 tons from 77,488 tons in 1997, due to the collapse of the real economic sector, especially of the food, beverage, and consumer-goods industries. Although such demand improved in the following years, the growth was very slow. Over the past five years (19962000), the growth in the domestic demand for plastic film averaged only 1.6% per year.

However, despite the sharp decline in domestic demand, Indonesia's plastic film industry did not sink. Thanks to the sharp depreciation of the rupiah against the U.S. dollar, Indonesian plastic film became highly price-competitive on the international market. Moreover, nearly all of Indonesian plastic-film products are already certified for ISO 9002, which is recognized by the global market. As a result, over the past five years (1996-2000), the volume of Indonesia's plastic film exports grew by an average 36.3% per year from 20,539 tons in 1996 to 64,056 tons in 2000.

Thanks to the success in producers' export-penetration efforts, the domestic production of plastic film grew by a significant 10% per year over the same period. Even so, this production growth was still not high enough to enable the plastic film industry to operate at an optimum capacity level, given that its installed production capacity continued to rise and reached 161,700 tons/annum in 2000, due to the entry of new producers and to the completion of some expansion projects. In 2000, the plastic film industry turned out 94,136 tons, and this means that its utility rate was only 58.2%. Since the industries that consume plastic film have not fully recovered from the crisis, plastic film producers will face increasingly tough competition on the domestic market.

Plastic film

The use of plastic film as flexible packaging is becoming more and more popular. Three are four different processes of plastic film production, and they are as follows: the blown film process, the cast film/sheet process, and OPP (oriented polypropylene) or BOPP (biaxially oriented polypropylene) film process, and the PET film process. The plastic film that is produced through the blown film process is called PE film, and there are three types of it such as LDPE, LLDPE, and HDPE.

The plastic packaging (or flexible packaging) industry consumes plastic film in large quantities. There are four types of plastic film which Indonesia produces, and they are as follows: BOPP film, which includes CPP (cast polypropylene) film and PVdC coated (polyvinyledene) film; PVC food grade film; BOPET (biaxially oriented polyester) film, and PAN (polyacrylonitrile) film.

BOPP is the type of plastic film which is the most widely used as flexible packaging, i.e. as a substitute for cellophane film. It has better quality, a better appearance, and higher resistance to humidity than cellophane film. BOPP film products come in two different types: plain plastic film and special plastic film, the latter having some added value.

BOPP film is widely used not only as food packaging but also as cigarette packaging, adhesive tape, and others. According to its functions, BOPP film can be divided into six types as follows: plain film; heat sealable film; white/pearlescent film; metallizable/metallized film: PVdC coated film; and matte/dof film.

PVC film, which is similar to BOPP film, is also widely used as flexible packaging for food, candy, medicine, and cigarettes. However, the use of PVC film as flexible packaging for food and medicine is not very popular especially because it contains chlorine, a substance which is dangerous to human health.

Like BOPP, BOPET (polyester film) is also a certain type of plastic film that is used as flexible packaging, but it has better resistance to heat, scratch, and gas than the former. As such, BOPET is 40% more expensive than BOPP. Because of this, BOPP is more widely used as flexible packaging than BOPET. BOPET is used as packaging for certain products that require special protection, e.g. coffee (to make the aroma of the coffee last longer). In addition, BOPET also has other applications such as overlay for fancy plywood, packaging for cable, and others.

The latest type of plastic film is the so-called polyacrylonitrile film (PAN). This type of plastic film has very high resistance to gas and corrosive chemicals and, as such, it is used as flexible packaging for medicine, pharmaceutical products, cosmetic, and food to substitute for aluminum and polyester (BOPET). According to its usage, PAN can be divided into three types as follows: high barrier transparent film; high barrier metallized film, and high barrier pigmented film.

Currently, PT Argha Karya Prima Industry (Arkaprin), one leading plastic film producer in Indonesia, produces 25 types of BOPP film and market them under brand name Arlene. The 25 types of BOPP film which the company produces comprise six types of plain film, four types of sealable film, five types of PVdC coated film, four types of metallized film, and one type of matte film. In addition, Arkaprin also produces 30 types of rigid food-grade plastic film, and they comprise 23 types of PVC film and 7 types of PET film.

Another leading plastic film producer, PT Trias Sentosa, produces four types of plain film, three types of coextruded film, two types of metallized film, and two types of pearlized film and market them under brand name Astria/Armstrong. Meanwhile, PT Fatrapolindo Nusa Industry produces BOPP under brand name Falene, and PT Polidayaguna Perkasa under brand name Boplene.

Production capacity 161,700 tons per annum

Indonesia's plastic film industry is relatively new; it did not come into operations until 1984. However, this does not mean that BOPP film is a new thing in Indonesia. OPP/BOPP film has long been in use as flexible packaging in Indonesia, and it used to be called kertas kaca (glass paper). Until 1984, OPP/BOPP film was procured exclusively from import sources.

Until the outbreak of the crisis in 1997, the national plastic film industry grew rapidly in terms of its production capacity. In 1991, the industry's capacity to produce BOPP film was only 33,500 tons per annum. By the end of 2000, however, it has soared to 161,700 tons, not to mention its capacity to produce other types of plastic film. In 1991, there were only three producers in the plastic film industry, and they all produced BOPP film. In 2000, there were eight producers in this industry, of which five produced BOPP film and the other three PET film.

The largest producer of BOPP film in Indonesia is PT Argha Karya Prima Industry (Arkaprin), which is owned by the Napan Group. In 1997, the company managed to complete the implementation of its expansion project, which increased its production capacity from 35,000 tons/annum to 52,000 tons. In addition to Indonesia, Arkaprin also operates a plant in the Malaysian state of Selangor Darul Ehsan through its affiliate, Stenta Films (Stenta) Sdn. Bhd. of which the former owns 44%. Arkaprin's Malaysia plant has a BOPP film production capacity of 17,000 tons per annum.

In addition to BOPP film, Arkaprin also has a capacity to produce PET film (9,000 tons per annum), PVC food grade film and polyacrylonitrile film (5,000 tons per annum), and CPP film (4,000 tons per annum). In its export marketing efforts, Arkaprin is supported by two affiliates: International Resources Corp. (in Chicago) and International Resources Corp. Ltd. (in Hong Kong). Arkaprin earned the ISO 9002 certificate for its products in 1998 and Stenta in 1999. Both Arkaprin and Stenta have also earned the FDA (U.S. Food and Drug Administration) certificates for their products.

Originally, Arkaprin-which became a publicly listed company in 1992-- was jointly owned by PT Nawa Panduta (26.2%), PT Adhikara Nirmala (16.7%), PT Gitanirwana Madrasakti (10.8%), PT Risjadson (7.4%), Chia Soo Hiok (11.7%), Soegio Djojosapoetro (5%), Irawan Basuki (0.7%), Cooperatives (0.7%), and the public (21%). In 1999, however, the company's shareholding composition changed with PT Nawa Panduta owning 26.2%, PT Adhikara Nirmala 16.7%, Kommerzbank (Sea) Ltd. 10.7%, PT Gitanirwana Mandrasakti (8.2%), Chia Soo Hiok 8.1%, Soegio Djojosapoetro 5%, Irawan Basuki 0.7%, Cooperatives 0.7%, and the public 23.8%.

Initially, Arkaprin also owned a converting unit in addition to a plastic film production unit in its plant, which is located in Tangerang, Banten. In September, 1999, however, for efficiency purposes, the company sold its ownership of the converting unit to VAW Europack GmbH of Germany for Rp 60 billion.

Another leading plastic film producer, PT Trias Sentosa, became publicly listed in 1989 and earned the ISO-9002 certificate in 1992. Until 1999, the company was jointly owned by PT Adilaksa Manunggal (23.4%), PT Kopanca Linggabuana (11%), PT Mulia Gahara (10.4%), Sigit Hardjojudanto (8.6%), Mrs. Noek Brissina Soehardjo (5.2%), and the public (41.5%). In 2000, upon approval of its General Shareholders' Meeting, PT Trias Sentosa changed its shareholding composition with PT Adilaksa Manunggal owning 23.4%, PT Kopanca Linggabuana 11%, PT Rejo Sari Bumi 8.6%, Mrs. Noek Brissina Soehardjo 5.2%, and the public and Cooperatives (51.8%).

In 1996, PT Trias Sentosa completed the construction of its fourth production line, which increased its BOPP film production capacity to the current level of 40,000 tons per annum. In the same year, the company also commenced the operations of its first PET film production line, which has an annual production capacity of 12,000 tons. In marketing its BOPP film products, PT Trias Sentosa is supported by three companies: the Gudang Garam Group, the Panggung Electronics Group, and the Ariyo Seto Group.

The other two BOPP film producers are PT Fatrapolindo Nusa Industri and PT Polydayaguna Perkasa, whose annual production capacities are respectively 6,000 tons and 8,500 tons. Commencing its commercial operations in 1990, PT Fatrapolindo produces BOPP film with thickness of 12-70 microns using the Mitsubishi (Japanese) and Polinas (Turkish) process technologies. It produces 8 types of BOPP film and markets them under brand name Falene. The 8 types include heat sealable (one side/bothside side), metallisable, plain pearlized, and plain film BOPP. Affiliated to the Salim Group, PT Fatrapolindo is jointly owned by Sudwikatmono. Djasmin, Djoni Prananto, and Boedyharto Angsono.

Meanwhile, PT Polydayaguna Perkasa, which has been in operations since 1989, produces at least 5 types of BOPP film using the Mitsubishi process technology. The 5 types include plain, metallizable, and heatsealable plastic film, and the company markets them under brand name Boplene/Prolene. The company's plant is located in Ungaran, Central Java.

One newcomer in the plastic film industry is PT Indopoly Swakarsa Industri (ISI), which is owned by the Salim Group and operates under the foreign investment (PMA) scheme. The company's plant, worth US$ 51.2 million, has an annual production capacity of 10,000 tons, and it is located in Purwakarta, West Java.

ISI is jointly owned by Prowell Group Ltd. (British Virgin Island) of Britain, PT Lingga Dasa Permata, and PT Risjadson. ISI commenced its commercial operations in 1996.

As for PET film, the national plastic film industry's production capacity has increased from 26,200 tons per annum to the current level of 46,200 tons with the commencement of operations of PT Bakrie Diafoil (BD) of the Bakrie Group, PT Kolon Ina (KI), and PT Indonesia Teijin Films (ITF).

BD, which is jointly owned by Diafoil Hoechst Co. Ltd. (80%) and PT Bakrie Kasei Corp. (20%), commenced its operations in 1996. Its plant, worth Rp 36.4 billion, is located in Serang, and it has a capacity to produce 4,200 tons of PET film per year using the process technology from Diafoil Hoechst Co. Ltd. Diafoil Hoechst Co. Ltd. itself is a joint venture between Mitsubishi Chemical Corporation and Hoechst Japan Ltd.

Meanwhile, PT Kolon Ina, which markets its PET film products under brand name Astroll, is jointly owned by Kolon Industries Inc. of South Korea and Indonesian businessman Tawi Rahardjo. Its plant, worth US$ 50 million, is located in Serang, West Java, and it commenced its operations in 1996.

The other PET film producer, PT Indonesia Teijin Films (ITF), is also a newcomer in the plastic film industry. The company is jointly owned by Teijin Limited of Japan (99.995%) and Japanese businessman Nobuo Yoshida (0.005%). ITF's plant, worth US$ 56 million, is located in Tangerang, West Java, and it commenced its operations in 1996.

Investor interest on the decline

Since the outbreak of the monetary/economic crisis in mid-July of 1997, the investor interest in the plastic film industry has been on the decline. According to data with Data Consult, the Investment Coordinating Board (BKPM) has approved only two new projects in this industry over the same period, of which the larger one belongs to PT Polykemas Internusa. According to the plan, the company will build a US$ 47.3 million plant with an annual production capacity of 15,000 tons in Bekasi, West Java. The plant is scheduled to come into operations some time in 2001.

Before the crisis, the BKPM had also approved a new project in the plastic film industry on behalf of PT Indo Thai Film Polytama, a joint venture between PT Prinavin Prakarsa of Indonesia and Thai Film Industries Public Co. Ltd. of Thailand. However, up to this day, there have been no signs of when the project is going to be implemented. According to the plan, the plant will be built with an investment commitment of US$ 32.0 million in Serang, West Java.

Output up 10.7% per year

For the period of 1993-1997, Indonesia's BOPP film production grew rapidly from 25,700 tons in 1993 to 74,605 tons in 1997. This was attributable to a continued surge in flexible packaging demand by the food, cosmetic, medicine, cigarette, and adhesive tape industry as well as to the resulting increase in the plastic film industry's production capacity.

In 1998, as the people's purchasing power weakened due to the sharp depreciation of the rupiah, which once reached as low as Rp 16,000 to the U.S. dollar, all the industries in the real economic sector showed a remarkable decline in performance, including the food and beverage industry. Consequently, the domestic demand for plastic film also plunged. Fortunately, the sharp depreciation of the rupiah drove up the competitive power of Indonesian products on the international market, making it easy for plastic film producers to succeed in their export-penetration efforts. As a result, the output of the national plastic film industry did not drop sharply in 1998; instead, it declined by only 12.4% to 65,335 tons, a level which was slightly higher than that of 1996.

Over the past two years (1999-2000), as the real economic sector started to show signs of recover, the domestic demand for plastic film also showed slight growth. However, the plastic film industry's output continued to grow thanks to export demand. Indonesia's plastic film output rose by 23.3% to 80,560 tons in 1999 and by 16.9% to 94,136 tons in 2000. Thus, over the past five years (1996-2000), the plastic film industry's output grew at an average annual rate of 10.7%.

Given that the plastic film industry's installed production capacity was 161,700 tons per annum in 2000 and its actual output for the same year 94,136 tons, its utility rate was only 58.2%, a level which could be optimized. This is understandable because a number of producers completed their expansion projects either before or after the end of 1997. PT Fatrapolindo Nusa Industry, for example, increased its annual production capacity by 10,000 tons and PT Trias Sentosa by 16,000 tons.

Procurement of basic materials

Although the domestic production of basic materials for plastic film has been high enough to meet domestic demand, the volume of such imports continued to be considerable in 1999 and 2000. This is believed to have been caused by the fact that quite a number of plastic film producers made use of the Masterlist Bapeksta facility, which exempted basic materials for plastic film from import duties.

As for polypropylene resin (or PP resin), a basic material for plastic film, the volume of its imports grew from 182,612 tons in 1996 to 206,450 tons in 2000, despite the fact that local polypropylene producers had a capacity to meet most of the demand. PT Tri Polyta Indonesia and PT Polytama Propindo, for example, respectively produce three types of film-grade PP resin for the production of inflated polypropylene (IPP) film, BOPP film, and CPP film.

Tri Polyta's PP resin products earned the ISO 9002 certificate in April 1996 and the ISO 14001 certificate in October 2000, enabling them to compete with other similar products on the international market. Currently, PT Tri Polyta has a capacity to turn out 585,000 tons of PP resin per year.

Meanwhile, PT PENI produces 11 types of PP resin, which comprise 7 types of film-grade LLDPE and 4 types of film-grade HDPE. PT Chandra Asri Petrochemical Center (CAPC), which has earned the ISO-9002 certificate from Lloyd's Register Quality Assurance Limited, produces 7 types of film-grade LLDPE and HDPE. The two companies have a combined capacity to produce 750,000 tons of PP resin per year.

Plastic film imports up

To help meet domestic demand, Indonesia still imports plastic film. For the past five years (1996-2000), the volume of such imports fluctuated with the tendency to grow at an average annual rate of 36.3%, i.e. from 23,004 tons (worth US$ 68.6 million) in 1996 to 29,684 tons (worth US$ 58.4 million) in 2000.

Due to the economic crisis, the volume of plastic film imports slumped by 40.1% to 14,352 tons (worth US$ 40.8 million) in 1998 from 23,928 tons in the previous year. However, in the next two years (1999-2000), it rose to 24,380 tons (1999) and 29,684 tons (2000).

There are four types of plastic film which Indonesia imports, and they are PE film, BOPP film, PVC film, and PET film, of which BOPP film is the most imported, followed by PVC film and PET film. For 2000, Indonesia imported 16,881 tons of BOPP film (or 56.8% of the total volume of plastic film imports), 10,080 tons of PVC film (33.9% of the total), and 2,275 tons of PET film (7.6% of the total).

Towards the commencement of AFTA in 2002, the market competition among plastic film producers is expected to be increasingly tough. In 1998, in the context of tariff harmonization, the Government issued Decree of the Minister of Finance No. 502/KMK.01/1998, whereby the import duty on plastic film was lowered from 40% to 25%. Subsequently, through Decree of the Minister of Finance No. 273/KMK.01/2000 dated 30 June, 2000, the Government decided to slash the import duty on plastic film further to 5% effective as from 2002.

Taiwan the largest supplier

Indonesia imports plastic film from a number of Asian and European countries as well as from Australia and the United States. Among these, the larger supplier of plastic film to Indonesia are Taiwan, South Korea, Japan, Malaysia, and the United States.

For the past two years (1999-2000), the largest supplier of plastic film to Indonesia was Taiwan, from which Indonesia imported 6,978 tons (worth US$ 7.7 million) in 1999 and 9,935 tons (worth US$ 13.7 million) in 2000. The volume of such imports from Taiwan in 2000 accounted for 23.5% of the total, which was 29,684 tons. Over the same period, the second largest supplier of plastic film to Indonesia was South Korea, from which the volume of such imports rose from 4,384 tons (worth US$ 8.1 million) to 5,668 tons (worth US$ 12.9 million). On the other hand, the volume of Indonesia's plastic film imports from Malaysia dropped slightly from 2,452 tons to 2,436 tons while the value increased from US$ 2.5 million to US$ 3.4 million.

Although the volume of such imports from Japan was only 2,380 tons in 2000, the value was as high as US$ 10.9 million, second to that from Taiwan. The value of plastic film imports from Japan was high because most of the plastic film supplied by Japan was of the more expensive types.

Earlier, the United States and Germany were two non-Asian countries that were among the more important suppliers of plastic film to Indonesia. In 1996, for example, the United States supplied Indonesia with 1,641 tons and Germany with 324 tons. In 2000, the United States supplied Indonesia with only 443 tons (worth US$ 3 million). On the other hand, the volume of such imports from Germany rose to 464 tons (worth US$ 1.2 million).

The other potentially large suppliers of plastic film to Indonesia include Singapore, China, Hong Kong, England, Canada, Italy, and Australia.

Exports worth US$ 122.9 million

Over the last five years (1996-2000), the volume of Indonesia's plastic film exports grew rapidly at an average annual rate of 36.3%, from 20,539 tons (worth US$ 45.4 million) in 1996 to 64,056 tons (worth US$ 122.9 million) in 2000. This rapid export growth took place especially in 1998 and 1999, when it reached respectively 66.5% and 66.3%.

As has been mentioned earlier, the rapid growth in Indonesia's plastic film exports was driven by four factors as follows: a drop in domestic demand as a result of the crisis; the sharp depreciation of the rupiah, which made Indonesian products more competitive on the international market; the expansion of the plastic film industry's production capacity; and the fact that all Indonesian plastic film products were already equipped with the ISO certificate, which was acceptable to the global market.

Nearly all plastic film producers in Indonesia supply some of their output to the export market. Of these, the most important exporters of plastic film are PT Arkaprin and PT Trias Sentosa, which produces 11 types of BOPP film.

Of the different types of plastic film, the most exported is BOPP film. In 2000, the volume of Indonesia's BOPP film exports reached 47,707 tons (worth US$ 96.1 million) or 86.2% of the total volume of its plastic film exports. In the same year, the second most exported type of plastic film was PET film, of which the export volume reached 14,694 tons (worth US$ 22 million). As for PVC film, the volume of its exports continued to grow at significant rates and reached 1,535 tons (worth US$ 4 million) in 2000.

Hong Kong the largest destination for Indonesian plastic film

Indonesia exports plastic film to a number of Asian, European, and African countries as well as to the United States. Of these, Hong Kong has been the most important destination for Indonesian plastic film. Over the period of 1996-2000, the volume of such exports to Hong Kong grew from 6,436 tons (worth US$ 9 million) in 1996 to 7,916 tons (worth US$ 9.3 million) or 14.9% of the total in 2000. The second largest destination for Indonesian plastic film in 2000 was the United States, to which Indonesia exported 5,823 tons (worth US$ 13.5 million). One reason for the high volume of Indonesia's plastic film exports to Hong Kong and the United States is the fact that PT Argha Karya Prima Industry has two subsidiaries which help distribute its output through their overseas agents.

In the Southeast Asian region, the most important countries of destination for Indonesian plastic film exports are Thailand, Singapore, Malaysia, the Philippines, and Vietnam. Over the past two years (1999-2000), the volume of such exports to Southeast Asian countries showed significant growth. The other country which increased its import of plastic film from Indonesia in 2000 was Pakistan (from 1,256 tons to 2,335 tons).

Consumption back to normal

Due to changes in people's consumption pattern, plastic film is gaining more and more popularity as a substitute for other flexible packaging materials such as cellophane film, kraft paper, aluminum foil, and others. The cigarette industry, for example, has switched from cellophane film to BOPP film for packaging because the latter does better than the former to protect cigarettes from humidity and weather/climate changes and, hence, enabling the aroma and taste of cigarettes to last longer. Besides, BOPP film has high resistance to dust because it is only slightly electrostatic.

Similarly, the food industry has also been switching to BOPP film for packaging because BOPP film has high resistance to humidity, oils, fats, and alkali, does not absorb odor, and does not leak. As a result, food that is packed in BOPP film lasts longer and is protected from contamination with other materials. On the other hand, plastic blown film is used mainly for the production of plastic sacks/bags.

Besides BOPP film, PET film is also gaining popularity as flexible packaging. In fact, PET film has higher resistance to weather changes and humidity than BOPP film. However, since PET film costs 40% higher than BOPP film, it is still much less widely used than the latter.

With the assumptions that domestic consumption equals domestic production plus imports minus exports and that the stock at the beginning of the year is the same as the year-end stock, the domestic consumption of plastic film for 1996 can be estimated at 67,334 tons and that for 1997 at 77,488 tons, up 15.1% from the previous year. In 1998, however, it dropped by 43.5% to only 43,802 tons. In 1999, it resumed growth and, in 2000, it reached 59,764 tons. Thus, over the period of 1996-2000, the domestic consumption of plastic film grew at an average rate of only 1.6% per year.

Amidst the fluctuations in the exchange rate of the rupiah against the U.S. dollar, domestic food and beverage producers have been making more efficient and innovative use of plastic film as flexible packaging. Sweetened-milk producers, for example, now turn out products in one-serving packaging of plastic film. Besides, the hike in the prices of other flexible-packaging materials such as kraft paper and aluminum foil over the last few months has also helped drive up the use of plastic film.

BOPP film consumption by sector

A Data Consult survey reveals that in 1996, the largest consumer of BOPP film was the food-industry sector, which produces instant noodles, snacks, biscuits, and others. The food industry accounted for 55% of the total domestic consumption of BOPP film in 1996. Up to the end of 2000, it is believed that no significant changes had taken place to the composition of plastic film users in Indonesia.

The share of packaging in the total cost of food and beverage production has remained relatively high, ranging around 15%. The lower the value of the product, the higher the share of packaging in the total cost of production. Plastic film comes in different grades and in different types, of which only some can be used as packaging for food and drinks. Unfortunately, some food and beverage producers, especially the small-scale ones, are still ignorant of which types of plastic film are not recommended for use as packaging. Plastic film of the Styrofoam type, for example, is banned in a number of countries. However, the domestic market still receives an influx of imported food and beverage products in such packaging.

Due to the use of unsuitable packaging materials, locally produced food and beverage products have difficulties competing on the export market, more so with the competition among such products on the international market increasingly tough. Apart from this, the industry of packaging materials in Indonesia still does not have a capacity to meet the demand of export-oriented food and beverage producers for certain types of packaging. As a result, these producers have to procure the required packaging materials from import sources in order to be able to meet the requirements set by their foreign buyers.

Converting companies found mostly in Jabotabek

To add value to plastic film, this material is processed into flexible packaging by the flexible packaging and rotogravure printing industry, which is also popularly called the converting industry. This industry processes plastic film into different forms of flexible packaging such as bags, sachets, and sacks by printing, laminating, and metallizing it.

Most BOPP film producers supply their output directly to the converting industry. The converting industry plays a very important role in the marketing of plastic film. The largest user of plastic film, i.e. the food industry sector, sends its products (e.g. instant noodles, snacks, biscuits) to the converting industry before marketing them. The converting industry then packs them in flexible packaging and print labels on the packaging.

The links between plastic film producers and the user-industry are very close. PT Trias Sentosa, for example, has very close ties with PT Gudang Garam, which uses plastic film as flexible packaging for its cigarettes. Cigarette companies are among the most important customers of plastic film producers.

Of more than 40 converting companies currently operating in Indonesia, most are found in the area of Jabotabek (Jakarta-Bogor-Tangerang-Bekasi). This is understandable because converting companies' customers are mostly found in this area as well.

Output of converting industry

Until the outbreak of the crisis in mid-1997, the output of the converting industry grew quite rapidly with the user-industries. In 1997, it reached 48,817 tons, up 13.3% from the previous year. In 1998, however, due to the collapse of the real economic sector, it plunged by 42.6% to only 28,033 tons.

In 1999, as the exchange rate of the U.S. dollar to the rupiah was moving closer and closer to a rational level, the real economic sector began to show signs of revival, and this helped reinvigorate the converting industry. In 2000, the output of the converting industry reached 38,249 tons, a level which was close to that of 1996. As a result, the output of the converting industry grew at an average annual rate of 1.3% over the past five years (1996-2000).

The growing number of companies which produced plastic film, both BOPP film and PET film, did not encourage the growth of the converting industry because, during the crisis, these companies supplied most of their output to the export market while domestic demand was low.

Prospects and conclusions

The commencement of operations of some plastic film producers in the initial years of the crisis has caused the market competition among such producers to remain tough, more so with the purchasing power of the domestic market still weakened. However, since most plastic film producers were established as export-oriented companies, they survived the crisis, given that the sharp depreciation of the rupiah made their products more competitive on the global market.

In view of the continued upward trend in exports, the national plastic film industry still has bright prospects for growth although the domestic market is still slack. The fact that national economy remains highly vulnerable to any turbulence in domestic politics and in global economy means that the process of its recovery is likely not to be very smooth. As a result, the demand of the real economic sector, especially of the food and other consumer product industries, for plastic film cannot be expected to grow as rapidly as it did before the crisis.

Nevertheless, the plastic film industry itself still has good prospects for growth, given the success achieved by producers in their export-penetration efforts. Such success has been possible, thanks to the fact that the exchange rate of the U.S. dollar to the rupiah still supports the competitive power of Indonesian products on the export market, that the basic materials for plastic film are easily available on the domestic market (more with the continued growth in the production of polypropylene), and that nearly all Indonesian plastic film products have received the ISO 9002 certificate.
Table - 1
Types of Plastic Film and Their Applications

(Tons)

Type Application

BOPP film:
- Plain film packaging for food, office stationery, candy,
 adhesive tape, and others
- Heat sealable film packaging for cigarettes, food, and candy
- White/pearlescent packaging for food products and ice-cream
- Metallizable/ substitute for aluminum foil, used as packaging
 metalillized film for food and gifts and as a decorative material
- PVdC Coated film packaging for products that require protection
 against humidity, air, and odor
- Matte/Dof film laminating on food packaging, magazine cover,
 brochures, and cosmetic bottles/containers

PVC film:
- Rigid food grade laminating on candy packaging, albums,
 plain films sacks, and others
- Rigid food grade sticky packaging for cigarettes,
 audio/video cassettes, and others
- Rigid food grade packaging for food
 metallized films
- Rigid food grade colored packaging for candy
 pigmented films

BOPET film:
- Plain film material for audio tape wrapping, cables, and
 wires wrapping cables dan wires manufacture.
- Clear material for flexible packaging,
 printing, and laminating
- Super clear material for high metal adhesion and
 balanced high barrier flexible packaging
- Metallized material for high barrier flexible packaging
- PVdC coated material for high barrier flexible packaging

PAN film:
- high barrier alternative packaging material
 transparent film
- metallized film alternative packaging material
- pigmented film alternative packaging material

Source: Data Consult
Table - 2
BOPP Film and PET Film Producers and
Their Production Capacities, 2001

(tons/year)

Name of Company Status Location of Production
 Plant Capacity

BOPP Film:
Trias Sentosa PMDN Sidoarjo 40,000
Argha Karya Prima Industry PT, PMDN Citeureup 52,000
Polidayaguna Perkasa, PT PMDN Ungaran 6,000
Fatrapolindo Nusa Industri, PT PMDN Tangerang 8,500
Indopoly Swakarsa Industri, PT PMA Purwakarta 10,000
Total 116,500

PET Film:
Bakrie Diafoil, PT PMA Serang 4,200
Kolon Ina, PT PMA Serang 10,000
Indonesia Teijin Films, PT PMA Tangerang 10,000
Trias Sentosa, PT PMDN Sidoarjo 12,000
Argha Karya Prima Industry, PT PMDN Citeureup 9,000
Total 45,200

Note: PMDN = Domestic investment; PMA = Foreign investment

Source: Data Consult
Table - 3
New Projects in BOPP Film Industry, 1998 - 2000

 Date of
 Name of Location Status BKPM
 Company Approval

- Polykemas Bekasi, PMA Feb'98
 Internusa, PT West Java
- Trustech Sidoardjo, PMA Des'2000
 Industry, PT East Java

 Production
 Name of Capacity Investment
 Company (tons/year)

- Polykemas BOPP film - 15.000 47.356 *
 Internusa, PT
- Trustech BOPP film - 12.500 9.6 **
 Industry, PT

* in millions of rupiahs

** in millions of U.S. dollars

Sources: BKPM (Investment Coordinating Board)/Data Consult
Table - 4
Indonesia's BOPP Film Production, 1996 - 2000

 Year Production Growth
 (tons) (%)

1996 64,874 --
1997 74,605 14.9
1998 65,335 -12.4
1999 80,560 23.3
2000 94,136 16.9
Average growth 10.7

Source: Department of Industry and Trade/Data Consult
Table - 5
Indonesia's Polypropylene Resin Imports, 1996 - 2000

 Year Volume Value
 (tons) (US$ '000)

 1996 182,612 179,201
 1997 178,332 162,511
 1998 174,168 106,745
 1999 245,418 134,312
 2000 206,450 176,098

Source: CBS/Data Consult
Table - 6
Indonesia's Plastic Film Imports, 1996-2000

Type: of Plastic Film 1996 1997 1998

BOPP film:
- Self adhesive plate, sheet, 1,459 1,551 1,054
 film ill rolls 9,376 7,515 5,582
- Self adhesive plate, sheet, 1,596 2,192 2,126
 film of plastics in other size 10,007 6,189 5,995
- Other form of polymers of pro 9,017 5,444 3,491
 pylene 18,667 8,195 4,954
- Other plates, sheets, 1,122 2,527 1,536
 film of other plastics 5,403 10,781 5,032
Sub- Total 13,194 11,714 8,207
 43,453 32,680 21,563
PVC film:
- Other form of polymers of 5,228 5,124 3,505
 vinyl chloride, flexible 9,909 10,720 6,510
- Other plates, sheets, film of 1,284 1,422 1,587
 polymers of vinyl chloride 6,926 8,866 8,950
Sub - Total 6,512 6,546 5,092
 16,835 19,586 15,460
PET film:

- Tensilized polyester 43 41 55
 film < 12 micron 194 120 153
- Other tensilized polyester 2.202 1.454 661
 4.367 3.636 1.769
Sub - Total 2.245 1.495 716
 4.561 3.756 1.922
PE film: 1.053 4.173 337
Self adhesive plate, sheet, 3.782 3.259 1.869
film in rolls of PE

Total 23.004 23.928 14.352
 68.631 59.281 40.814

Type: of Plastic Film 1999 2000

BOPP film:
- Self adhesive plate, sheet, 2,125 2,574
 film ill rolls 5,948 7,232
- Self adhesive plate, sheet, 2,773 3,221
 film of plastics in other size 6,447 7,396
- Other form of polymers of pro 6,614 7,409
 pylene 10,919 11,258
- Other plates, sheets, 2,931 3,677
 film of other plastics 4,593 7,435
Sub- Total 14,443 16,881
 27,907 33,321
PVC film:
- Other form of polymers of 6,235 6,528
 vinyl chloride, flexible 8,519 11,206
- Other plates, sheets, film of 2,060 3,552
 polymers of vinyl chloride 5,685 7,673
Sub - Total 8,295 10,080
 14,204 18,879
PET film:

- Tensilized polyester 179 443
 film < 12 micron 260 685
- Other tensilized polyester 1.204 1.832
 1.950 3.972
Sub - Total 1.383 2.275
 2.210 4.657
PE film: 259 448
Self adhesive plate, sheet, 1.079 1.582
film in rolls of PE

Total 24.380 29.684
 45.400 58.439

Source: CBS/Data Consult
Table - 7
Indonesia's 1999 and 2000 Plastic Film Imports,
by Country of Origin

Tons
(US$ '000)

Country of origin 1999 2000

Taiwan 6,978 9,935
 7,732 13,703

South Korea 4,384 5,668
 8,142 12,977

Malaysia 2,452 2,436
 2,537 3,473

Japan 1,580 2,380
 6,561 10,902

China 1,555 1,958
 753 877

Singapore 1,394 1,299
 2,507 3,083

U S A 292 443
 2,841 3,058

Hong Kong 68 651
 166 825
 68 651
 166 825

Others 5,677 4,914
 14,161 9,541

Total 24,380 29,684
 45.400 58.439
Table - 8
Indonesia's Plastic Film Exports, 1996-2000

 Type of Plastic Film 1996 1997 1998

BOPP film:
- Self adhesive plate, sheet 1.555 667 1.235
 film of plastics in rolls 3.546 1.279 3.005
- Self adhesive plate, sheet 1.037 594 345
 film of plastics in other 2.257 1.487 411
- Other form of polymer of 12.918 13.449 28.000
 propylene 25.633 21.893 36.461
- Other plates, sheets, 2.195 1.583 899
 film or plastics 6.141 5.153 3. 128
Sub total 17.705 16.293 30.479
 37.577 29.812 43.005
PE film:
- Self adhesive plate, sheet 48 1 8
 film in rolls of polyetylene 107 1 28
PVC film:
- Other form of polymers of 62 155 80
 V. chloride flexible 196 571 244
- Other plates, sheets, film 9 16 6
 polymer of vinil chloride 80 112 27
Sub total 71 171 86
 276 683 271
BOPET film:
- Tensilized polyester film 536 21 128
 < 12 micron 661 112 27
- Other tensilized plyester 2.179 4.559 4.336
 film 6.776 9.526 6.640
Sub - total 2.715 4.580 4.464
 7.437 9.638 6.770
Total plastic film 20.539 21.045 35.037
 45.397 40.134 50.074

 Type of Plastic Film 1999 2000

BOPP film:
- Self adhesive plate, sheet 4.501 3.155
 film of plastics in rolls 8.677 7.150
- Self adhesive plate, sheet 1.055 1.713
 film of plastics in other 4.872 26.037
- Other form of polymer of 35.944 35.807
 propylene 43.835 50.353
- Other plates, sheets, 5.666 7.032
 film or plastics 7.515 12.568
Sub total 47.166 47.707
 64.899 96.108
PE film:
- Self adhesive plate, sheet 174 120
 film in rolls of polyetylene 259 785
PVC film:
- Other form of polymers of 312 1.110
 V. chloride flexible 772 3.183
- Other plates, sheets, film 295 425
 polymer of vinil chloride 619 859
Sub total 607 1.535
 1.391 4.042
BOPET film:
- Tensilized polyester film 1.752 3.090
 < 12 micron 619 859
- Other tensilized plyester 8.577 11.604
 film 11.883 18.926
Sub - total 10.329 14.694
 13.486 22.012
Total plastic film 58.276 64.056
 80.035 122.947

Source: CBS/Data Consult
Table - 9
Indonesia's 1999 and 2000 Plastic Film Exports,
by country of destination

Tons
(US$ '000)

Country of
destination 1999 2000

Hong Kong 6,436 7,916
 9,029 9,352

U S A 9,885 5,823
 14,311 13,582

Philippine 3,710 5,729
 5,387 9,093

Thailand 4,626 5,216
 3,258 6,274

Japan 2,375 4,247
 3,898 11,593

Malaysia 2,036 3,950
 2,304 4,871

Vietnam 3,027 3,907
 3,601 5,222

Singapore 2,139 3,480
 8,317 28,380

Pakistan 1,256 2,335
 1,979 3,651

India 2,238 1,715
 2,485 3,229

Australia 3,285 21,302
 4,489 3,463

Others 17,263 17,436
 20,977 24,237

Total 58,276 64,056
 80,035 122,947

Source: CBS/Data Consult
Table - 10
Estimates of Indonesia's Plastic Film Consumption,
1996-2000

 Year Consumption Growth
 (tons) (%)

 1996 67,334 --
 1997 77,488 15.1
 1998 43,802 -43.5
 1999 46,664 6.5
 2000 59,764 28.1
Average growth 1.6

Source: Data Consult
Table - 11
Indonesia's 2000 Plastic Film Consumption,
by sector

Industry Consumption Share in Total
 (tons) (%)

Food industry 32,870 55.0
Cigarette industry 9,562 16.0
Adhesive tape 8,965 15.0
industry
Others 8,367 14.0
Total 59,764 100.0
Table - 12
Plastic Film Converting Companies, 2000

 Name of Company Location

PT Avesta Contonental Pack J1. Raya Bekasi Km 28, West Java
PT Topan Printing Indonesia Cibitung, Bekasi, West Java
PT Emblem Asia Cibitung, Bekasi, West Java
PT Plasindo Lestari Purwasari, Karawang, West Java
PT Iluva Gravure Industri Cikopo, Purwakarta, West java
PT Polikemas Sanputra Cikupa, Tangerang, Banten
PT Tri Sejahtera Mandiri Karawaci, Tangerang, Banten
PT Sapta Warna Cemerlang Pasirjaya, Tangerang, Banten
PT Suryakemasindo Sejati Cikupa, Tanggerang, Banten
PT Tomypack Makmur Batuceper, Tangerang, Banten
PT Tirta Marta Package MFC TRG Jakarta
PT Tunas Alvin Batuceper, Tangerang, Banten
PT Flexipack Converting Tangerang J1. Raya Serang Km 5,4, Banten
PT Mulia Pack Inti Sempurna Cikande, Serang, Banten
PT Mutiara Hexagon Balaraja, Serang, Banten
PT Sinter Roto & Pack J1. Raya Serang Km 10, Banten
pT Super World Wide Foods Jatake, Serang, Banten
PT Dai Nippon Printing Indonesia Pulogadung, Jakarta
PT Indogravure Ciputat, Jakarta
PT Indokonverta Indah Jakarta
PT Prima Makmur Rotokinido Cengkareng, Jakarta
PT Super Indah Makmur Jakarta
PT Supernova Ancol, Jakarta
PT Samudra Montaz Jakarta
PT Rapigra Cakung, Jakarta
PT Polykemansindo Arijaya Cengkareng, Jakarta
PT Pura Roto Jakarta
PT Semarang Packaging Industri Kaligawe, Semarang, Central Java
PT Mega Jaya Lestari Kaligawe, Semarang, Central java
PT Solo Murni Agung Solo, Central Java
PT Mandiri Prima Perkasa Pandaan, Surabaya, East Java
 Nanggewer, Bogor, West java
PT Surabaya Perdana Rotopack Waru, Surabaya, East Java
PT Surya Multi Indopack Rungkut, Surabaya, East Java
PT Panverta Cakrakencana Pasuruan, East Java
PT Kemaselok Plastindo Porong, Sidoarjo, East, Java

Source: Data Consult
Table - 13
Indonesia's Flexible Packaging and
Rotogravure Printing Output, 1996-2000

 Year Production Growth
 (tons) (%)

 1996 43,097 --
 1997 48,817 13.3
 1998 28,033 -42.6
 1999 29,865 6.5
 2000 38,249 28.0
Average growth 1.3

Source: Department of Industry and Trade/Data Consult

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Title Annotation:Indonesia's domestic consumption of plastic film
Comment:Plastic film industry saved by export penetration. (INDUSTRY PROFILE).(Indonesia's domestic consumption of plastic film)
Publication:Indonesian Commercial Newsletter
Geographic Code:9INDO
Date:Oct 23, 2001
Words:7503
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