Indonesia’s Plastic Prices Jump 50%–100% as Government Moves to Remove Import Duties

 On April 28, Reuters reported that Indonesia plans to remove import duties on certain plastic products and LPG used by the petrochemical industry starting in May, aiming to help local plastic producers cope with a naphtha shortage. Indonesia’s Coordinating Minister for Economic Affairs, Airlangga Hartarto, said the measure will take effect in May.

This is not a simple tax cut. The fact that Indonesia is willing to bring tariffs down to zero shows that the local plastics chain is already under real pressure. Airlangga said that because the Iran war has disrupted naphtha supply from the Middle East, domestic plastic prices in Indonesia have already risen by 50% to 100%.

That increase is extreme. It also shows the problem is no longer just about thinner corporate margins, but about downstream price pressure spreading quickly.

The products covered by this tariff exemption are also highly targeted. They are mainly materials used in plastic packaging production, including polypropylene, linear low-density polyethylene, and high-density polyethylene. In addition, import duties on LPG used by the petrochemical industry will be cut from 5% to 0%. Previously, Indonesia imposed import duties of 5% to 15% on plastic products.

The policy is tentatively set for six months, after which the government will reassess it.

These products are not marginal materials. They are basic plastics widely used in packaging, food and beverages, daily chemicals, consumer goods, and industrial logistics. The Indonesian government specifically noted that rising plastic prices could pass through to other goods because food and beverage products rely heavily on plastic packaging.

In other words, the shortage of petrochemical raw materials is no longer only a problem for plastic companies. It is starting to affect end-consumer prices.

That is why Indonesia is acting through the tariff side. Under normal circumstances, a country does not easily remove import duties, because doing so affects domestic industry protection and fiscal revenue. But when a local supply gap begins pushing up consumer-facing prices, the government will give more weight to stabilizing supply and prices.

For Indonesia, the most urgent issue right now is not protecting every part of the domestic price system, but making sure plastic raw materials can enter the country and that the downstream packaging chain does not run out of supply. The essence of the tax cut is to use external cargoes to patch a hole in the local supply chain.

After the Middle East conflict disrupted naphtha supply, many Asian markets that depend on imported feedstocks are likely to face similar problems: upstream costs are high, spot supply is tight, and downstream industries cannot simply stop production.

Plastic packaging is especially sensitive because it is closely tied to everyday consumption. Food, beverages, and daily goods all rely on packaging materials. If packaging costs rise too quickly, the pressure may eventually reach consumers. Indonesia’s move is essentially an attempt to cool down a key point in the inflation chain before it spreads further.

But zero tariffs do not mean the problem is solved. Tariffs can be cut immediately, but cargoes do not necessarily appear immediately. The root cause of the naphtha shortage lies in Middle East supply and shipping disruptions. Indonesia’s import-duty removal can lower the entry barrier, but it cannot create supply out of nowhere.

If global plastic feedstocks remain tight, Indonesian companies may still face high prices, waiting lines, and delivery uncertainty even after paying fewer duties. Policy can cushion costs, but it cannot replace stable supply.

For local plastic producers, the policy is certainly positive in the short term. Lower import costs can ease raw material pressure to some extent and help prevent part of the cost burden from being passed immediately downstream.

But what happens after six months will still depend on the Middle East situation, naphtha supply, LPG prices, and regional trade flows. If supply recovers, zero tariffs may remain just a temporary support measure. If supply stays tight, Indonesia may need to further adjust its energy and petrochemical feedstock policies.

At a deeper level, Asia’s petrochemical market is moving from “companies absorbing costs on their own” to “governments stepping in to stabilize supply chains.” India has already removed import duties on some petrochemical products, South Korea has begun restricting hoarding of key petrochemical feedstocks, and now Indonesia is cutting tariffs on plastics and petrochemical LPG to zero.

Different countries are taking different measures, but the direction is the same: feedstock shortages are no longer just corporate operating problems. They have become supply-chain stability and consumer-price issues.

So Indonesia’s move is not simply about reducing the burden on the plastics industry. It is an early attempt to cool down the country’s packaging and consumer-goods chain under the shock from the Middle East. What is worth watching next is whether more Asian countries will follow with similar measures.

If more countries begin cutting tariffs, restricting hoarding, and adjusting inventories, it will show that this round of petrochemical disruption has entered a stage of intensive policy intervention.