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Home | News |Indonesia: Overview of Asia-Pacific TDI Market (Part III)
Indonesia: Overview of Asia-Pacific TDI Market (Part III)
Updated: 2017-08-29 16:57 Source: PU World share:
A World Power on the Pacific

With an area of 195,000 square kilometers, Indonesia is with the largest land area among Southeast Asian countries. It has a population of 263 million, that ranks fourth in the world, only after China, India and US.


Almost 59% of Indonesian population live on the island of Java, which covers an area of no more than 140,000 square kilometers, close to that of the Anhui Province in China. The GDP share that Java Island yields among other regions in the country is similar to the proportion of that of its population. Java Island is a place featured by relatively more centralized languages and cultures compared with other regions. Therefore, it is the hub of Indonesia’s consumer products industries, including the major downstream segments of TDI market.

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Indonesia’s Quarterly Economic Growth Rate 2007Q2-2017Q2 Unit: percentage 

Indonesia’s per capita GDP is about $3,974, mid-ranking among the ten Southeast countries. With the average economic growth rate kept high at 5.29% over the past 17 years, the country is recognized as one of the emerging economies that have been developing with fastest rate in the world. The population is also expanding rapidly, 1.1% growth in 2017.

 

In such an emerging economy, the polyurethane industry is concentrated on polyurethane foam while the volume of other TDI’s common downstream segments is relatively small. Indonesia imported 39,400 tons of TDI in total from China, Japan and South Korea in 2016, around 90% of which, according to the estimation of local traders, entered the of flexible foam industry. Aside from BASF, Covestro, Hanwha, INOAC, OCI and other Chinese suppliers, no other TDI brands are heard available in the country. As in 2016 both European and North American markets remained tight for most of the time, and given the distance factor, China, Japan and South Korea could be assumed to be the sources for the absolute majority of TDI consumption in Indonesia in 2016.

 

Indonesia is the largest TDI import market in Asia-Pacific region that is without any domestic producer; the huge market is divided into many smaller parts by ocean, province, cultures and languages and is featured by a complex supplier network. However, most major buyers are based on Java Island, which includes PT. Royal Abadi Sejahtera, PT. INOAC Polytechno Indonesia and PT. Serim Indonesia, all largest downstream manufacturers.

 

PT. Royal Abadi Sejahter (“RAS”) is the earliest and the largest polyurethane foam producer in Indonesia and the leading manufacturer in the bedding industry and also the largest TDI consumer in Indonesia. It contributes to nearly half of all TDI consumption in the country. The company is mainly engaged in mattress business while supplying PU foam to other downstream players. Its TDI products are sourced from Hanwha, BASF, Mistui and Covestro, mainly through direct orders from the producers in the three Northeast Asian countries.

 

INOAC Corporation has business in all major Southeast market and is the second largest TDI consumer in Indonesia. INOAC Indonesia focuses on supplying local automotives and motorcycles industries, and is also a major supplier for technology-intensive industries there, including electronic and electrical appliances industries. INOAC is also involved in furniture and construction. The TDI products INOAC consumed are mainly purchased from Covestro via local channels or directly imported from BASF, Hanwha, and Mitsui.

 

PT. Serim Indonesia (“Serim”) is the third largest polyurethane foam manufacturer in Indonesia, supplying to downstream industries such as automotive, furniture, electrical appliances, clothing, consumer goods and cosmetics. Its TDI products are sourced from BASF, Hanwha, OCI and Mitsui, mainly through direct import.


Shares of TDI Consumed in Indonesia by Downstream Manufacturers 2016


The import of TDI from China was only smaller in volume than that of India in the APAC region. Among total 8,361 tons of TDI imported from China in 2016, 7,099 tons were from Convestro’s facility in Shanghai. 


Indonesia’s TDI Import from China by Company 2016 Unit: ton


Supply & Demand

Driven by rapid growth in both population and GDP, Indonesian TDI market is expected to expand quickly in the foreseeable future, and is one of the greatest contributors of TDI demand growth in the Asia-Pacific region as well as the most promising market in Southeast Asia. In the long run, pushed by the growing population, Indonesian TDI market size is expected to grow at speed faster than its economy.

 

All TDI goods in Indonesia market are imported from outside the country since no TDI production unit exist domestically, meaning domestic TDI prices are generally in line with that in other Southeast markets. It is reported that in early August, prices were at around $3,500/ton. Given that China is the largest TDI market in the Asia-Pacific region, the on-going price surge in China is expected to eventually spread to Indonesia market.

 

TDI markets in the Asia-Pacific, North America and Europe are currently tight, mainly due to planned or unplanned shutdowns across the globe; and downstream manufacturers actively building up stocks for hot seasons in late autumn.

 

It is noteworthy that Sadara, a joint venture of Dow and Saudi Aramco, commissioned its 200kpta TDI plant in Jubail, Saudi Arabia on August 14, 2017; BASF’s 300kpta TDI plant in Ludwigshafen, Germany is reportedly running at reduced rates until a permanent reactor can be installed next year; Wanhua’s 300kpta integrated TDI facility is heard to be under construction with further details to be disclosed; Shandong Juli is also heard to be planning an additional 150kpta TDI project.

 

The commission of Sadara’s plant in Saudi Arabia seemed to have given a shot of cardiotonic to the TDI market in the Asia-Pacific. Although the realization of full operation will be months away if history of past large TDI projects were any indications; but to the TDI producers and traders in the APAC regions, the long expected end of the on-going high profitability of TDI could already be seen on the horizon. Players in the market could not help but contemplate on the opportunity of seizing the fleeting moment of profitability; while for the downstream buyers, before additional capacity could reach the market, it will be darkness before dawn.


 

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