Indonesia Reduces Import Duties on LPG and Selected Plastics to 0%

The measure is scheduled to take effect in May 2026 and will remain in place for an initial period of six months.

Key Measures

• According to official statements, the tariff reduction applies to:
• Polypropylene (PP)
• Polyethylene (PE), including HDPE and LLDPE
• Liquefied petroleum gas (LPG) used in the petrochemical sector

Import duties, previously in the range of 5% to 15%, will be fully eliminated during the implementation period.

Background

The policy has been introduced in response to tightening regional supply of naphtha, which has led to increased production costs for polyolefins.

Rising feedstock costs have contributed to higher domestic plastic prices, while manufacturers are facing challenges in securing stable raw material supply. These pressures have also been transmitted downstream to packaging and consumer goods sectors.

By reducing import duties, the government aims to improve access to competitively priced raw materials and stabilize supply conditions.

Market Impact

The tariff adjustment is expected to:

• Enhance the competitiveness of imported PP and PE
• Ease domestic supply constraints
• Support operating rates among downstream processors
• Mitigate short-term price volatility

In addition, the removal of LPG import duties provides an alternative feedstock option, partially offsetting the impact of constrained naphtha supply.

Outlook

In the near term, the policy is expected to support Indonesia’s plastics processing sector and improve overall market stability. However, as a temporary measure, its continuation will depend on developments in global energy and petrochemical markets.

The adjustment may also influence regional trade flows for polyolefins and contribute to shifts in market dynamics across Southeast Asia.