Indonesia's petrochemical industry is facing considerable operational pressure. On one hand, the domestic industry is highly dependent on imported raw materials; on the other hand, a large influx of cheap plastic products from China is undermining the competitiveness of local companies. A member of Commission VII of the Indonesian House of Representatives stated that the government should introduce policies to encourage the use of local raw materials, protect local operators, and address competitive pressure from imported products. The Secretary General of the Indonesian Plastics Industry Association noted that although the petrochemical industry has entered a recovery phase, the market situation remains unstable, with multiple factors such as price fluctuations, logistics costs, market purchasing power, and raw material supply continuing to suppress business operations.
Affected by geopolitical conditions, raw material prices have fluctuated, and for some product categories, the core issue lies not in raw materials or prices but in logistics. Rising sea freight costs have driven up the cost of imported goods, and the domestic market has largely adopted a wait-and-see attitude, awaiting clarity on prices and distribution channels. He argued that the current market environment could serve as a window of opportunity for local petrochemical companies to expand in the domestic market, but once import trade returns to normal, the local industry could easily fall into a passive position again, requiring ongoing government protection. The petrochemical industry needs stable and continuous production; weakening demand directly lowers factory utilization rates. Some companies' utilization rates fell below 70%, and at or below this threshold, companies begin to incur losses.
Additionally, disruptions in raw material supply from the Middle East have forced companies to turn to alternative sources that are costlier and require a shipping time of up to 60 days, further increasing working capital pressure. He called on the government to accelerate policy response and ensure protective measures align with dynamic market changes. The recovery of the mining, textile, food and beverage, infrastructure, and automotive industries is expected to drive growth in demand for petrochemical products. The association particularly looks forward to the development of Indonesia's domestic electric vehicle industry, which would boost the application of local components and petrochemical raw materials. He described the petrochemical industry as having moved out of critical condition, but not yet fully recovered. The recovery phase is highly fragile, and any external shock could push it back into difficulties, requiring government support to safeguard the current recovery process.
