Corporate

Imports of Raw Materials Difficult, Polyester Industry Threatened to Halt Production

February 12, 2024, 09.26 PM  | Reporter: Dimas Andi
Imports of Raw Materials Difficult, Polyester Industry Threatened to Halt Production

CORPORATE ACTION-JAKARTA. The Polyester industry in Indonesia is currently struggling due to difficulties in meeting the needs of its raw material, Mono Ethylene Glycol (MEG). It is feared that this problem will negatively impact downstream industries such as textiles and others.

The Chairman of the Indonesian Fiber and Filament Yarn Producers Association (APSyFI), Redma Gita Wiraswata, said that the problem was caused by inaccurate calculations when making policy decisions because MEG is in short supply or shortage. Under normal conditions, the need for MEG in Indonesia as a raw material for Polyester is recorded at 600,000 tons per year.

On the other hand, the production capacity of MEG in Indonesia is only 200,000 tons per year. However, in the last three years, Indonesia has only been able to produce about 50,000 tons of MEG per year. "As a result, we have to import MEG, mostly from Saudi Arabia," said Redma, Monday (12/2).

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Unfortunately, currently, businesses cannot import MEG due to the Minister of Trade Regulation (Permendag) No. 36 of 2023, which includes a policy that changes import supervision from post-border to border.

APSyFI strongly supports the implementation of Permendag 36/2023 to ensure the domestic market absorbs locally-made products. The same applies to Polyester producers who are committed to absorbing local raw materials, including MEG.

However, APSyFI believes that based on this policy, the port of loading and unloading is limited to Tanjung Priok, Jakarta. However, there are no MEG import facilities there. Only the Merak Port, Banten has tank facilities for importing MEG, but Permendag 36/2023 does not allow MEG imports through that port.

"We see this point as killing the Polyester industry forever and will affect its downstream industry chain, namely textiles, bottles, and packaging," revealed Redma.

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He continued, so far only one MEG producer is operating in the country, namely Polychem Indonesia. APSyFi received information that this year Polychem Indonesia does not yet have a MEG production plan. So, if MEG imports cannot be carried out and the supply of MEG domestically is nil, then all Polyester factories will automatically stop operating. Because MEG is one of the main raw materials for making Polyester.

APSyFI admits, that because there is Permendag 36/2023, since last week MEG producers in Saudi Arabia have not wanted to send their products to Indonesia until there is further clarity on the rules. Therefore, currently, Polyester producers rely on the remaining MEG stock which will last for the next 3 weeks.

"If this problem is not resolved this week, it is certain that in the next three weeks, the Polyester factory will stop operating and lay off all its employees," added Redman.

Another impact is that the supply of Polyester as a raw material for the textile, bottle, and packaging industry will be sluggish, so the entire industry chain is forced to depend on imported raw materials. Indonesia also has the potential to lose export foreign exchange of around US$ 600 million because 20% of the national Polyester production is sold abroad.

Furthermore, APSyFI has conveyed this problem to the government since December 2023 and actually, the government is very aware of this problem and the impact that will be generated. "However, until now there is no way out and solution," he concluded.

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Editor: Syamsul Azhar
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