Harso Kurniawan, Jakarta – Rising geopolitical tensions in the Middle East are beginning to affect Indonesia's petrochemical industry, which remains heavily dependent on imported feedstocks.
Industry data show that Indonesia imports 100% of its annual naphtha requirement, estimated at around 3 million tons. Meanwhile, roughly 50% of key plastic raw materials – including polyethylene (PE), polypropylene (PP), polyethylene terephthalate (PET), polystyrene (PS), and polyvinyl chloride (PVC) – amounting to about 8 million tons annually, are also sourced from abroad.
Even minor disruptions to global supply chains can quickly ripple through domestic production, prompting industry players to explore alternative feedstocks, said Fajar Budiono, secretary general of the Indonesia Olefin, Aromatic, and Plastic Industry Association (Inaplas), on Monday.
"For example, liquefied petroleum gas could serve as an alternative feedstock to naphtha, which would require a 0% import duty," Fajar said.
He added that energy availability has become a more urgent concern than fiscal policy relaxation. Without stable supply guarantees, maintaining efficiency and competitiveness will be increasingly difficult amid mounting global pressures.
At the same time, heightened uncertainty has prompted many countries to tighten supply security, with rising demand in several regions signaling growing concern over feedstock availability in international markets.
Fajar said efforts are underway to reduce dependence on the Middle East, with Indonesian petrochemical players and the government initiating discussions with alternative suppliers in Central Asia, Africa, and the Americas – though longer shipping times present logistical challenges.
"We have started engaging suppliers in Central Asia, Africa, and the Americas. Delivery times will be longer, at least around 50 days. All countries are now trying to secure feedstock," he said.
In the current environment, competition for raw materials is intensifying, as countries prioritize securing supplies for their domestic industries.
Economist Yusuf Rendy Manilet said a temporary reduction of import duties to 0% on LPG and other feedstocks could help ease input costs and accelerate supply diversification in the short term, though such measures should be selective and time-bound.
Over the longer term, he noted, Indonesia's structural dependence on imports – particularly in the chemical sector – poses a greater challenge, despite the country's potential to become a regional petrochemical hub.
"We have abundant resources such as gas, palm oil, and minerals, but the industrial value chain remains incomplete. As a result, we export raw materials and import their derivatives," said Yusuf, a senior researcher at the Center of Reform on Economics (CORE).
He said Indonesia should prioritize developing petrochemicals based on domestic gas, expanding oleochemical industries using palm oil, and leveraging mineral resources for downstream chemical production.
"At the same time, it is important to build integrated industrial zones to improve efficiency and competitiveness against imported products," Yusuf said.
Source: https://jakartaglobe.id/business/middle-east-tensions-begin-to-hit-indonesias-petrochemical-industr