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Oil price rise to impact plastic industry: Association
Plastic raw material prices have increased in the past few months as oil prices have spiked.
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Visitors watch a demonstration of a bottling process at the Plastics and Rubber Indonesia 2018 Expo in Jakarta. (The Jakarta Post/Dhoni Setiawan)
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ndonesian Olefin, Aromatic and Plastic Industry Association (Inaplas) secretary-general Fajar Budiono says the soaring global oil price is hurting domestic businesses through higher production costs.
“The [Ukraine] conflict has driven up oil prices, causing raw material prices to go up [sooner than usual],” he told The Jakarta Post on Friday, explaining that, “raw material prices usually start increasing in April after factories overhaul [their equipment], but instead, they have begun to hike now.”
Fajar predicted that the polymer price would increase by US$200 to $350 per ton from its current price of $1,450 per ton if world oil prices continued to stay above $100 per barrel. The polymer price stood at $1,250 per ton in January, Fajar said.
Polymer is one of the key raw materials for the manufacture of plastic, and raw materials account for approximately 80 percent of plastic production costs, according to Fajar, while the remaining 20 percent comes from utility costs, including electricity, and labor costs.
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In addition to the higher raw material costs, possible upward adjustment of fuel or electricity prices as a result of the rising fossil fuel prices could also increase production and distribution costs for processing industries like the plastic industry, Fajar said.
Fuel oil accounts for more than 60 percent of product distribution costs in the industry, while raw materials are the largest cost factor for production, followed by electricity.
