Industry Profile: Plastic resin Industry in Indonesia

MARKET INTELLIGENCE REPORT ON

DEVELOPMENTS OF POLYVINYL CHLORIDE (PVC) RESIN INDUSTRY IN INDONESIA

May 2007

Current Issue

The production capacity of PVC resin industry in Indonesia has not much changed from 592,000 tons since 2004. The capacity is not expected to increase in the coming several years as annual production is still below the installed capacity.

The increase in the price of basic material ethylene has discouraged expansion of Polyvinyl Chloride (PVC) industry. The price of ethylene has increased with the soaring prices of crude oil.

The country PVC resin industry is also dependent on imports for ethylene basic material. CAPC the only producer of ethylene in the country has only an annual capacity of 525,000 tons as against the domestic requirement of 1.4 million tons.

Meanwhile, the country’s production of PVC resin has continued to rise since 2003 when production was only 350,000 tons. In 2006, the production already reached 400,000 tons.

Until 2005, most of the production was disposed of on the domestic market, but in 2006, exports exceeded sales on the domestic market.

PVC resin industry is also a big consumer of energy that an increase in electricity tariff affects the performance of the industry.

Production capacity and producers

In the past 10 years PVC resin industry has scarcely expanded. The number of producers has remained 5 companies. There is no new producer after the operation of Satomo Indovyl Polimers (SIP) and Siam Maspion Polymer (SMP) in 1995.

The five producers had a total annual production capacity of 588,000 tons in 2006, down from 592.000 tons in 2004 as Eastern Polymer reduced its capacity from 50,000 tons to 36,000 tons per year and Sulfindo Adi Usaha increased its capacity from 70,000 tons to 80,000 tons per year.

Plans to increase capacity was discouraged by the act that here is no guarantee of basic material supply. There is only one producer of ethylene in the country namely Chandra Asri, which already operates at full capacity.

Eastern Polymer

Development of PVC resin industry in Indonesia began in 1976 when the factory of the first producer Eastern Polymer (EP) was built in Cilincing, Jakarta.

EP is a joint venture between PT Anugrah Daya Laksana Indonesia (50%) and Mitsubishi Corpo¬ration and Tokuyama Co. Ltd. of Japan (50%).

In 1995, the entire stake of Tokuyama was taken over by Mitsubishi. In February, 1998, the process of production was stopped with demand fell as a result of the monetary crisis.

The designed production capacity of EP was 50,000 tons per year but the effective capacity was only 36,000 tons per year that could be increased to 42,000 tons through efficiency per year.

Standard Toyo Polymer

The country’s production capacity for PVC resin rose a year later after the operation of Standard Toyo Polymer (Statomer) in 1977. Statomer is 30% owned by Toyo Soda Manufacturing Co. Ltd., 20% by Mitsui & Co., 40% by PT Sempurna Catur Guna and 10% by PT Blue Standard Polymer. Its production capacity is 87,000 tons per year. The factory of the company is located in Cilegon, Banten.

Toyo Soda Manufacturing (Tosoh) is known to have an integrated chemical factory. Tosoh has a number of groups of business units including petrochemical group producing olefin and polymer, base chemical group that produces chlor alkali and cement, specialty chemical group producing organic chemicals, special material, electronic material, and scientific instrument.

In addition, Tosoh has service group operating in logistic business, warehousing, R&D, and maintenance services.

In other countries Tosoh has factories producing PVC namely Plastech Corporation (PVC Compound), Taihei Chemical Ltd (PVC film and sheet, nitro cellulose), Taiyo Vinyl Corp (PVC resin), Tokuyama Sekisui Co Ltd (PVC resin) all in Japan, Philippine Resins Industries Inc (PVC resin), Tosoh (PVC compound) in the Philippines, Tosoh Chemical Industries Inc (PVC resin) in Guangzhou, China.

The factory in China came on line only toward the end of 2006 with an annual production capacity of 220,000 tons built with an investment of 8 billion Yuan. The factory is to be supplied with cheap VCM basic material from its factories in Nanyo, Japan.

All products of Statomer are in powder. Its main consumer in the country is Maspion with factory in Sidoarjo, East Java. Maspion is known as a producer of household equipment and plastic materials.

Asahimas Chemical

After more than 10 years the country’s production capacity for PVC resin increased with the operation of Asahimas Chemical (ASC) in 1989 as the largest producer of PVC resin in the country. The production capacity of ASC is 285,000 tons per year.

ASC has an integrated facility producing Caustic Soda (NaOH), Ethylene Dichloride (EDC), Vinyl Chloride Monomer (VCM), Hydrochloric Acid (HCl), Liquid Chlorine (Cl2) and Sodium Hypochlorite (NaClO) in Cilegon, Banten occupying a land plot of 90 hectares. ASC’s production capacity for VCM is 400,000 tons and EDC 29,900 tons per year.

The shareholders of ASC include Asahi Glass Company and Mitsubishi Corp. In the beginning Asahi Glass Company was only a producer of flat glass and automotive glass and display (Cathode ray tubes/ CRTs, Flat panel displays/ FPDs, etc.).

However, later in 2005, the company expanded its business operations to production of chemicals (Fluorochemicals,Chlor-Alkalis Urethane etc), and electronic and energy sectors (Semiconductor-related products,Optoelectoronics products,Frit and paste glass).

In Indonesia, Asahi has a number of subsidiaries including PT. Asahimas Flat Glass, PT. Video Display Glass Indonesia, PT. Asahimas Chemical, and PT. Riken Asahi Plastics Indonesia.

ASC plans to build its own power generating plant with a capacity of 380 Megawatt to guarantee power supply to its factories.

Sulfindo Adi Usaha

In 1995, there were two new players in PVC resin industry - Satomo Indovyl Polimers (SIP) and Siam Maspion Polymer (SMP) respectively with an annual capacity of 70,000 tons and 100,000 tons of PVC resin.

SIP was licensed by BKPM in 1995 as a joint venture between the Salim Group (50%), Tosoh Corp. (25%), and Sumitomo Corp (25%). SIP constitutes an expansion of the Salim Group in petrochemical business. The first business unit of the Salim group in petrochemical industry is PT. Indochlor (1977), which was renamed in 1995 PT. Sulfindo Adi Usaha (SAU). The company produces chlorine and caustic soda. Salim had a 95% stake in the company.

The Salim group also had a stake in PT. Satomo Indovyl Monomer (SIM), which was established in 1995 producing Ethylene Dichloride (EDC) and Vinyl Chloride Monomer (VCM). Salim had a 51% stake in the company.

After the 1997 crisis, Salim handed over all of its stakes in the three companies to the bank rescue agency BPPN in compensation for its debt to the government.

In the process of debt restructuring the assets were sold in 2001 at a price of US$ 41.2 million to Durability of the Emperor Group (Hong Kong).

Durability later increased its control to 74.29% of the three companies with Sumitomo holding 25% and the rest owned by Timsco. Durability then combined the three companies -- SIP, SIM, and SAU using the name of SAU. The capacity was increased from 70,000 tons to 80,000 tons. SAU uses the technology of suspension polymerization under license of Tosoh Corp.

Siam Maspion Polymers

PT. Siam Maspion Polymers (SMP) was a joint venture between two Thai companies - Siam Cement Plc (SCC) as a 30% shareholder, Thai Plastic and Chemical Public Company Limited (TPC) as a 20% owner -- and local partner PT. Maspion as a 50% owner. Its factory is located in Gresik, East Java with an annual capacity of 100,000 tons.

SCC is a company group having 5 lines of business – chemical, paper, cement and building material industries and distribution. Its chemical business unit produces upstream products including olefin, styrene monomer, PTA, and MMA, and downstream products including polyethylene, polypropylene, polyvinyl Chloride

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