Indonesia Petrochemicals Report Q2 2008

Indonesia's petrochemicals plants were hit by temporary closures for maintenance, rising naphtha costs and poor derivatives margins in H108, putting hopes of expansions in olefins and polyolefins production in jeopardy, according to BMI's latest Indonesia Petrochemicals Report.

Indonesia's country's only ethylene plant, with capacity of 620,00tpa and run by Chandra Asri, cut operating rates to 85% in Q1 and 80% in Q2 due to cost pressures. Feedstock problems and a power failure also led to a temporary closure in January. This will mean production in the first half will be 56,000 tonnes below capacity. Meanwhile, Asahimas Chemical planned to shut down one of its three 100,000 tonnes per annum (tpa) polyvinyl chloride (PVC) lines in West Java for around a month beginning mid-May for maintenance. The turnaround will mean a loss of 10,000 tonnes of PVC, leading to a tightening of supply at a time of good demand in the Indonesian market, adding upward pressure to PVC prices in south east Asia, with spot cargo prices rising by as much as 3.5-4.5% or US$40-50 per tonne.

In early March, PT Trans Pacific Petrochemical Indotama (TPPI) closed its aromatics complex at Tuban down after port damages paralysed exports and imports and will not reopen until May at the earliest. The company declared force majeure on its benzene and paraxylene (PX) supplies following damages at its port facility. The loss would amount to at least 33,000 tonnes of benzene and 50,000 tonnes of PX. While benzene spot prices were unaffected by the outage, PX prices rose by around 3% following the news of the force majeure. Routine turnarounds also affected Pertamina's PX and benzene lines, Kaltim Methanol Industri's 660,000tpa methanol plant, Amoco Mitsui Indonesia's (AMI) 460,000tpa PTA facility. However, in all cases, supply was unaffected with operators' continuing to supply customers from their inventories.

Despite reducing production to well below capacity in H108, Chandra Asri is considering debottlenecking to raise capacity to about 700,000tpa. The company is also considering the processing of cracked gasoline and C4 fractions, and produce aromatics like benzene, toluene and xylenes from cracked gasoline. The benzene production will go to the firm's styrene monomer subsidiary, Styrindo Mono Indonesia.

Chandra Asri is conducting a feasibility study on propylene production using olefins conversion technology (OCT). The firm has acquired a loan totalling US$200mn, which will be used mostly to finance the cracked gasoline and C4 fraction projects. The company plans to increase styrene monomer exports to up to 190,000tpa and has begun supplies to Malaysia, India, Thailand, and south China; Chandra Asri has a capacity of 340,000tpa styrene monomer in two lines.

In BMI's Asia Petrochemicals Business Environment Rankings matrix, Indonesia is in fourth place, with 49.0 points, 9.6 points, below the regional average of 59.4 points. It is 12.8 points behind India and 6.4 points ahead of the Philippines.