Indonesian President Joko Widodo’s push to boost domestic petrochemical production has helped send shares of the nation’s largest plastic producer up 205 percent, making it this year’s top performer in the market.
The surge in shares of conglomerate PT Barito Pacific compares with a 0.6 percent gain for the benchmark Jakarta Composite Index.
The conglomerate, which produces everything from energy to petrochemicals, is also the best performer among 155 members of the MSCI ASEAN Index.
A growing middle class and urbanization have been driving the demand for plastic products in Indonesia. The strong appetite contributed to a deficit of 193 trillion rupiah (US$13.8 billion) in petrochemicals in Southeast Asia’s largest economy, which worsened the current-account deficit, said Widodo, who set a target to end imports of the material in the next three to four years.
Widodo, known by the nickname Jokowi, has pledged to support petrochemicals’ capacity upgrade as the nation aims to narrow the gap in the current-account balance, which stood at 2.7 percent of GDP in the third quarter.
Indonesia’s annual production capacity of polyethylene, a raw material for bottles and plastic bags, can only meet a third of its domestic demand of 2.3 million tonnes, he said in a speech.
Barito, originally a timber company founded by tycoon Prajogo Pangestu in 1979, would benefit from such a push, as it is the biggest petrochemical player in the nation. Shares of its unit, PT Chandra Asri Petrochemical, jumped 68 percent this year to a record high.
The usage of plastics has come under global scrutiny in a bid to protect the environment. The UN Environment Programme estimates about 300 million tonnes of such waste is produced annually and has initiatives to reduce single-use plastics, introducing levies or banning certain products outright.
Yet investors are bolstered by the resilient consumer sector in Indonesia amid global trade tensions.
Official data showed household consumption, which accounts for 56 percent of the economy, has been growing more than 5 percent over the past three quarters, a similar pace as last year.
That is adding to confidence that demand for plastics would drive consumption of 7.2 million tonnes of raw materials annually, according to official data.
“Petrochemical demand has a high correlation with GDP or consumption growth,” Lee Young Jun at PT Mirae Asset Sekuritas said.
An improvement in profitability and expectations that additional capacity built from next year to 2025 would provide better growth drove the gains in Barito and Chandra Asri shares, Lee said.
CHIP WAR: Tariffs on Taiwanese chips would prompt companies to move their factories, but not necessarily to the US, unleashing a ‘global cross-sector tariff war’ US President Donald Trump would “shoot himself in the foot” if he follows through on his recent pledge to impose higher tariffs on Taiwanese and other foreign semiconductors entering the US, analysts said. Trump’s plans to raise tariffs on chips manufactured in Taiwan to as high as 100 percent would backfire, macroeconomist Henry Wu (吳嘉隆) said. He would “shoot himself in the foot,” Wu said on Saturday, as such economic measures would lead Taiwanese chip suppliers to pass on additional costs to their US clients and consumers, and ultimately cause another wave of inflation. Trump has claimed that Taiwan took up to
A start-up in Mexico is trying to help get a handle on one coastal city’s plastic waste problem by converting it into gasoline, diesel and other fuels. With less than 10 percent of the world’s plastics being recycled, Petgas’ idea is that rather than letting discarded plastic become waste, it can become productive again as fuel. Petgas developed a machine in the port city of Boca del Rio that uses pyrolysis, a thermodynamic process that heats plastics in the absence of oxygen, breaking it down to produce gasoline, diesel, kerosene, paraffin and coke. Petgas chief technology officer Carlos Parraguirre Diaz said that in
SUPPORT: The government said it would help firms deal with supply disruptions, after Trump signed orders imposing tariffs of 25 percent on imports from Canada and Mexico The government pledged to help companies with operations in Mexico, such as iPhone assembler Hon Hai Precision Industry Co (鴻海精密), also known as Foxconn Technology Group (富士康科技集團), shift production lines and investment if needed to deal with higher US tariffs. The Ministry of Economic Affairs yesterday announced measures to help local firms cope with the US tariff increases on Canada, Mexico, China and other potential areas. The ministry said that it would establish an investment and trade service center in the US to help Taiwanese firms assess the investment environment in different US states, plan supply chain relocation strategies and
Japan intends to closely monitor the impact on its currency of US President Donald Trump’s new tariffs and is worried about the international fallout from the trade imposts, Japanese Minister of Finance Katsunobu Kato said. “We need to carefully see how the exchange rate and other factors will be affected and what form US monetary policy will take in the future,” Kato said yesterday in an interview with Fuji Television. Japan is very concerned about how the tariffs might impact the global economy, he added. Kato spoke as nations and firms brace for potential repercussions after Trump unleashed the first salvo of