Source: Conbit

The petrochemical industry processes raw materials from gas processing and oil refining into a wide range of products including plastics, synthetic fibers, fertilizers, adhesives, dyes, detergents, and synthetic paints. According to the IEA report, petrochemical feedstock is responsible for 12% of global oil demand, which is expected to increase with the growing demand for plastics, fertilizers, and other products. 

A Statista report stated that the production capacity of petrochemicals worldwide reached almost 2.3 billion metric tons in 2021. It is expected to grow significantly by 2030, specifically in China, India, and Iran as the countries with the largest petrochemical capacity additions. In addition to that, the industry’s global market value is also expected to reach over one trillion U.S. dollars. Growing demand for products alongside a decline of fossil-derived liquid fuels in the transportation sector could make petrochemicals one of the largest drivers for oil demand in the near future. 

With data provided, it raises the question of how does the petrochemical industry perform in Indonesia and globally? What prospects does it have in Indonesia? Read more to find out!

The Covid-19 Impact on the Global Petrochemical Industry

The industry experienced an accelerated decline in 2020 as a product of the pandemic. The impacts were not limited to irregular across value chains, with automotive and construction applications seeing particularly steep declines, and packaging demand remaining robust. Reasons for the following include stockpiling, a surge in delivery services, and increased healthcare focused activity (McKinsey).

The short term impact of the pandemic was seen in uneven demand-side impact. The supply side, however, has been less affected. Frankly, many petrochemical assets have weathered the storm quite well and only a few supply chains were disrupted. Most companies were able to maintain physical distancing and balance operation in the plants to provide necessary ingredients or materials to fight the pandemic. 

While of course, McKinsey stated that the industry experienced medium to long term impact of Covid-19 as well. One of the indicators of this was that the industry value pool fell by approximately 45% as a consequence of slowing demand growth and strong capacity additions, which led to low utilization levels and lower prices. 

Latest Trends Regarding the Industry

The first trend regarding the industry revolves around rising environmental concerns by manufacturers. Most governments have encouraged companies to take initiatives and create a more environmentally friendly production process. Most of the key players include upgrading their operations to meet new pollution control regulations. 

While on the other hand, the driving factor of this industry would revolve around the rising plastic consumption in developing economies which will be anticipated to drive market growth. A large portion of petrochemicals produced is consumed to manufacture plastics like polyethylene, polypropylene, and polystyrene. The demand for those plastics increased over the past few decades, such as plastic packaging for food and other commercial products. With the expectancy of increasing consumer product demand in developing economies, the purchasing power will increase which adjacently increases plastic consumption. 

Indonesia’s Target to Become the Largest Petrochemical Producer in ASEAN

The Ministry of Industry of Indonesia continues to focus on developing investment in the chemical industry to be able to substitute import of chemical materials and goods. As stated in IDN Financials, the Director General of Chemical, Pharmaceutical, and Textile Industries who represented the Minister of Industry at the Inauguration of the PCV Factory Expansion stated that in 2021, the export value of chemicals and chemical goods reached USD 18.86 billion. He added that in the midst of the pandemic and economic recovery, they will continue to improve the trade balance deficit in the chemical industry sector. 

In addition to that, the Indonesian government is trying to oversee the construction projects of the giant chemical industry with a total investment value of USD 31 billion. This investment is intended to strengthen commodities in the upstream chemical sector and be able to substitute petrochemical products that are still imported. 

Enter Indonesia’s Petrochemical Industry with BRIGHT Indonesia

It would take a lot of in-depth research about Indonesia’s petrochemical industry. In order to enter the Indonesian market, you would need the right local partner to assist you. 

BRIGHT Indonesia is an ideal business partner for you. We will assist you on the ground, including virtual assistants during the mission, logistical planning, and detailed communication. It can cause your company to focus on developing partnership cooperation rather than the hassles of the business trip.

BRIGHT Indonesia provides several services such as Market Insight Research, Business Partnership Engagement, Management and Strategy Consulting, and Foreign Direct Investment. The services will help your business to:

1. Provide assistance for you in expanding and developing your business by identification of potential partners.
2. Secure the agreement between client companies and future Indonesian business partners by providing a list of potentially suitable partners, arrange business meetings, and act as a liaison.
3. Supporting our foreign client companies from the private sector with developing corporate or business unit strategies or helping your company from public sector organizations with public policy.
4. Link client companies both from the private and public sectors in global foreign direct investment (FDI) through training and assisting your company in entering FDI source countries to gather investment for your company’s local markets.

For more information, email info@brightindonesia.net.