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ublicly listed petrochemical giant Chandra Asri Petrochemical is planning to build a new factory to double its production of polyethylene, the world’s most popular plastic. In so doing, the company hopes to secure a greater domestic market share currently dominated by imports.

The plant, slated to be built in the middle of Chandra Asri’s existing industrial complex in Cilegon,
West Java, will produce 400 kilotons of polyethylene per year and is targeted to commence operations in 2020. The company’s existing polyethylene plant produces 336 Kt per year.

The project is estimated to require between US$300 million and $400 million in investment, said Chandra Asri plant advisor Halmilus Moesa.

The plant is expected to improve Chandra Asri’s business position among polyethylene producers in Southeast Asia. The firm is the sixth largest producer in the region, corporate secretary Suryandi said.

“We are optimistic that the additional 400 kilotons will significantly boost our position among the region’s top polyethylene producers,” Suryandi told a press briefing on Friday.

The project is also part of Chandra Asri’s plan to increase its 25 percent domestic market share for polyethylene, he added. Of overall domestic demand reaching 1.4 million tons in 2015, 43 percent was met by imports and 32 percent by domestic companies, company data shows.

Chandra Asri recently secured technology licenses from Univation Technologies, LLC., a joint venture between the ExxonMobil Chemical Company and the Dow Chemical Company, to build the new polyethylene plant. Polyethylene is a chemical substance derived from ethylene that is used to produce flexible packaging, jerry cans and tarpaulin, among other products.

Following the Univation deal, Chandra Asri hopes to secure the engineering, procurement and construction (EPC) contracts in 2018. The majority of Chandra Asri’s shares are held by diversified conglomerate Barito Pacific and Thai-based SGC Group.

To supply the new polyethylene plant, the company will leverage ethylene processed by its newly revamped naptha cracker facility, also in Cilegon. The facility has a production capacity of 860 kilotons per year.

Chandra Asri is the sole naptha cracker operator in Indonesia, which, apart from ethylene, also produces naptha derivatives such as propylene, a raw material for polypropylene to make automotive parts; py-gas, used to produce benzene and toluene; and mixed C4, a source to make butadiene that is used to manufacture tires.

Suryandi said the increase in production capacity at the naptha cracker plant had contributed to Chandra Asri’s robust financial performance in the January-June period, during which the company’s net profits soared by 670 percent to $131 million year-on-year and its sales rose by 10 percent to $882 million yoy.

The company, which mainly relies on imported crude oil to supply its naptha cracker, also benefited from plunging oil prices, which hit $50 per barrel this year, 50 percent lower than the mid-2014 price of $100 per barrel.

Chandra Asri is trying to increase the utility rate of its naptha cracker plant to 90 percent in a bid to hit the company’s annual net profit target of around $250 million and sales target of nearly $1.7 billion, Suryadi added.

Institute for Development of Economics and Finance (INDEF) researcher Imaduddin Abdullah said he believed the country’s petrochemical industry would perform well in the remaining three months of the year and in 2017, partly due to low global crude oil prices and stable demand for plastics. (mos)