Indonesia’s polypropylene (PP) and polyethylene (PE) markets have entered a sharp correction cycle in late April and early May 2026 after the government unexpectedly slashed import duties on key plastic raw materials to 0% for six months. The move, aimed at easing domestic inflation and stabilizing packaging costs, has rapidly shifted market sentiment from panic buying to aggressive price reductions across both imported and domestic polymer markets.

The Indonesian government officially announced on April 28 that import duties on PP, HDPE, and LLDPE would be reduced from the previous 5–15% range to 0% starting May 2026. Import tariffs on LPG feedstock used by the petrochemical industry were also cut from 5% to zero. Authorities said the temporary measure would remain in place for six months before reassessment.

The policy came after Indonesian domestic plastic prices surged dramatically during Q1 and early Q2 2026 due to Middle East-related naphtha disruptions and regional supply shortages. Government officials acknowledged that some domestic plastic prices had risen by 50–100% during the supply crisis, creating inflationary pressure across food packaging, consumer goods, and manufacturing sectors.

However, the tariff reduction immediately triggered a collapse in bullish sentiment.

Market Reaction: Sharp Domestic Price Cuts Begin

By early May 2026, major Indonesian producers had already implemented multiple rounds of price reductions in response to expectations of rising import inflows and weakening buyer confidence.

According to regional market sources, one major Indonesian producer issued its:

• first price cut in late April,
• fourth consecutive reduction by May 4,
• and fifth consecutive reduction by May 6.

Buyers across Indonesia largely stepped back from procurement, anticipating further downside as cheaper imported cargoes from China, the Middle East, and Southeast Asia become increasingly competitive under the zero-duty regime.

Estimated Indonesia Polyolefin Market Movement

Key Drivers Behind the Market Collapse

1. Duty-Free Import Window Opens Floodgates

The most immediate bearish factor is the removal of import tariffs on major packaging resin grades. Previously, Indonesian buyers faced:

• 5–15% import duties on PP and PE,
• elevated freight costs,
• and supply shortages.

With tariffs temporarily eliminated, imported cargoes suddenly became much more competitive.

Chinese and Middle Eastern suppliers quickly moved to increase offers into Indonesia, especially for:

• PP homo raffia,
• HDPE film,
• and LLDPE film grades.

This sharply reduced the pricing power of local producers.

2. Buyers Delay Purchases Anticipating Lower Prices

Another major factor accelerating the downturn is buyer psychology.

Converters and distributors that had aggressively secured cargoes during the shortage period are now delaying purchases, expecting:

• further domestic discounts,
• cheaper imports,
• and broader regional weakness.

Market liquidity slowed significantly during the first week of May, with many buyers shifting to hand-to-mouth purchasing strategies.

3. Regional Asian Market Weakness Adds Pressure

Indonesia’s correction is also occurring alongside broader weakness across Asian polyolefin markets.

China’s PP and PE markets remain structurally oversupplied due to:

• weak domestic demand,
• new production capacity,
• and increasing export pressure.

At the same time, freight rates across Asia have softened substantially during late April and early May 2026, improving export competitiveness for Chinese cargoes into Southeast Asia.

This combination further increases downside pressure on Indonesian domestic prices.

Indonesia Polymer Market Timeline (Apr–May 2026)

Outlook: More Downside Likely Through May–June 2026

Most market participants now expect Indonesian PP and PE prices to remain under pressure through at least May and possibly into June 2026.

Several bearish factors remain active:

• rising import availability,
• weak regional demand,
• falling freight costs,
• and cautious buyer behavior.

Domestic producers may continue reducing offers to defend market share against imported material. Meanwhile, traders are increasingly expecting aggressive Chinese export offers to enter Indonesia during Q2 2026.

PP markets appear especially vulnerable due to already weak regional margins and oversupply in China. PE markets may see slightly better support in certain film grades, but overall sentiment remains soft.

Unless major geopolitical disruptions once again tighten Middle East feedstock flows or sharply raise freight rates, Indonesia’s polyolefin market is likely to remain in correction mode after reaching extreme highs earlier this year.