Market News

Indonesia remains a major importer of raw materials and machineries in Southeast Asia, as it beefs up its plastics industry with highly advanced production systems. The country’s plastics import could reach US$11.22 billion by 2026 from US$9.49 billion in 2021, growing 2.6% year on year on average, according to ReportLinker.

In terms of machinery requirements, injection molding technology dominates, along with increasing demand for extrusion machinery. In particular, the robust performance of the domestic packaging, automotive, medical and chemical processing industries provides a stable market for injection molding systems. Machineries capable of processing recycled plastic materials are taking a front seat as Indonesian plastics manufacturers adhere to the preference for environmentally-friendly products in response to the circular economy targets.

Also, under the Making Indonesia 4.0, highly advanced technologies such as artificial intelligence (AI), Internet of Things (IoT), automation and robotics are being encouraged and fast gaining acceptance in the plastics industry, thereby creating opportunities for businesses providing such technologies, products and services. The strategy has identified five manufacturing sectors to spearhead industrial growth - food & beverage, automotive, electronics, chemical (including plastics), and textile.

Having the largest population in Southeast Asia with 270 million people, Indonesia is the world’s fourth largest consumer market in terms of population size - behind India, China and the United States. It comes to no surprise that personal consumption has been on the rise and demand for food and beverage packaging continues to swell. Food and beverage, healthcare, and consumer goods sectors are primary end-users of rigid plastic packaging, while food and beverage, health/beauty care and medical products are the main users of flexible packaging.

The Indonesian flexible packaging market is projected to reach US$5 billion by 2027, registering a CAGR of 4.74% from 2022-2027, based on Mordor Intelligence estimates. The flexible packaging sector plays a key role in Indonesia’s move to achieve a circular economy by encouraging the shift towards single-layer plastic films to multilayer, high-barrier, recyclable packaging material. The industry is driven by the country's large consumer base that demands low-cost flexible packaging products that are lightweight, convenient and aesthetically appealing. Smart manufacturing in packaging production has also enabled the production of reusable pouches, bag-in-box, liners, shrink wraps and other new options.

Companies in Indonesia are taking steps to upgrade and adopt more advanced technologies. Such is the case of PT Polyplex Indonesia, which has installed EXPERT K5 3650 from BOBST at its plant. The additional machine complements the existing EXPERT K5 3300mm already installed at Polyplex’s plant where BOBST coating drum unique to the EXPERT K5 enables less aluminum consumption and maximum productivity and production cost savings. BOBST’s AluBond and DarkNight® processes are applied for adhesion and metallizing of polyolefin-based PP films.

Lami Packaging (Kunshan) Co., Ltd. (Lamipak), a leading company engaged in providing solutions in aseptic packaging has started construction of its second factory in Indonesia. With investment amounting to US$200 million into Indonesia’s first aseptic packaging factory, Lamipak marks its first factory expansion overseas with a new site located near Cikande in Serang district, west of Jakarta. The factory covers 165,200 square meters and production floor space of 55,079 square meters. It will be equipped with world-class machinery that adheres to Industry 4.0 to become the most advanced and connected factory that Lamipak has ever built. Designed to have a capacity of 18 billion packs annually, the production line will be implemented in two phases with the initial part to commence production of up to 9 billion packs by the fourth quarter of 2023. Once the final phase is complete, the factory’s capacity will be one of the biggest in the world.

Automotive production in Indonesia is one of the priority industries that are being groomed for global competitiveness. Demand for high performance plastics for automotive has been on the rise as domestic automotive production receives foreign investments from leading automotive brands. Car production has reached an all-time high of about 900,000 units in 2022, almost twice than 2021 production.

Indonesia has also started to export its automotive products around Asia, an indication of its vast potential as automotive production hub in the region. The country has been a recipient of capital influx from foreign automotive companies due to its favorable investment policy and its huge consumer market.

Japanese automotive companies dominate the foreign segment. Noticeable is the continued interest of foreign companies in investing into Indonesia such as the move of Infineon Technologies to double its production site in Batam. Fully operational in 2024, the manufacturing facility will expand the capability for packaging, assembly and testing of automotive semiconductor products.

The reduction of greenhouse gas emissions has become the target of an increasing number of Indonesian companies. Following the conclusion of G20 Summit held in November 2022 in which one of the highlights is the issue on climate change, the Indonesian government is pushing for net-zero emission in all industries, and Indonesia’s industrial sector has been on the forefront of this goal.

Indonesian companies have started to move towards carbon reduction. Danone Indonesia has embarked on an ambition to achieve net-zero emission by 2050 as it implements climate change governance to speed up decarbonization. This goal is supported by its four pillars: fighting climate change, preserving the water cycle, building a circular economy and promoting regenerative farming. Its circular approach to packaging promotes the use of reusable bottles, which have been proven to produce 83% fewer emissions compared with single-use bottles.

On the other hand, Pertamina has entered into an agreement with ExxonMobil to develop carbon capture and storage (CCS) for cutting carbon emissions while supporting economic growth. This is in line with Pertamina's efforts to support the government's program to accelerate the energy transition and achieve the target of reducing emissions by 29% by 2030, as well as Indonesia’s 2060 net-zero ambition.

Another company, Dynapack Asia, has announced its progress in transforming its plastic packaging business to a more circular economy by increasing the recyclability of its products, promoting reusability of its products, and increasing recycled resin content. In 2021, Dynapack Asia, in partnership with Coca-Cola Europacific Partners Indonesia (CCEP Indonesia), established PT. Amandina Bumi Nusantara to create a mechanical recycling facility in Cikarang, West Java. The plant is able to process 30,000 metric tons of plastic waste annually to produce food-grade recycled PET resin.

At CHINAPLAS 2023, Asia’s No. 1 plastics and rubber trade fair, more than 3,900 exhibitors will present their latest innovations to support the requirements for innovative technologies of Southeast Asia’s fast-growing plastics industry. The exhibition has been well-attended by visitors from Indonesia who are always eager to see the on-site demonstrations and connect with exhibitors to learn more about innovative products and services that they can apply in their own business operations.