Indonesia-eu cepa agreement: Strategic Opportunities and Challenges for China's Polyethylene Exports to Southeast Asia

[Introduction]: The Comprehensive Economic Partnership Agreement (CEPA) signed between Indonesia and the European Union will officially come into effect in July 2025, with tariff concessions on chemical products being a key highlight. According to the agreement, the EU will implement a phased tariff reduction to zero over five years for polyethylene products exported from Indonesia. This policy benefit creates an important opportunity window for China's polyethylene exports to the Indonesian market.

Currently, China's polyethylene industry is facing supply and demand pressures due to continuous capacity expansion, and intensified domestic market competition is prompting companies to actively explore overseas markets. As the largest polyethylene consumer in Southeast Asia, Indonesia, with its... The market access advantages brought by the CEPA agreement to the EU are becoming an important strategic pivot for Chinese enterprises in planning their exports. In the next five years, with the improvement of Indonesia's local processing capacity and the completion of re-export trade channels, the scale of China's polyethylene exports to Indonesia is expected to achieve significant growth, providing new market space for domestic enterprises to absorb excess capacity.  

I, Translate the above content into English and output the translation directly without any explanation. Capacity Expansion and Supply Pattern Reshaping

Between 2025 and 2030, the global polyethylene industry is expected to experience significant capacity expansion, with an additional capacity of 37.47 million tons per year, with China being the core driving force behind this expansion. 2026 China's Production Capacity The growth rate is expected to reach as high as 32%, far exceeding the global average. This explosive growth will significantly alter the global polyethylene trade flow, and the import dependency of the Chinese market will continue to decline. It is particularly noteworthy that by 2026, China's reliance on resources from traditional polyethylene exporting countries such as South Korea, Thailand, and Japan will be greatly reduced, and the price advantage of homogeneous products from these countries will gradually disappear in the Chinese market. While expanding production capacity, Chinese companies are accelerating the research and development of high-end polyethylene products. This will enhance the autonomy of the supply chain while promoting exports.

2. Translate the above content into English and output the translation directly without any explanation. Regional Capacity Layout and Flow Changes

From the perspective of regional development, the expansion of polyethylene production capacity in China shows a clear regional clustering characteristic. South China: Planned to be put into operation. The addition of 7.08 million tons will reduce the supply-demand gap in the region to 1.27 million tons by 2025, and the region is expected to reach saturation by 2026. Northwest region: An additional capacity of 5.97 million tons will make it an important resource exporting area. North China region: An additional capacity of 3.3 million tons will significantly improve the regional balance.

This capacity layout will reshape the domestic logistics system, with resources from the northwest region flowing more towards North China, East China, and exporting to Central Asia; resources from the Guangdong region will primarily reach the Yangtze River Delta areas such as Ningbo and Yuyao, as well as Qingdao. Meanwhile, the export channels to Southeast Asian countries like Vietnam and Indonesia will also be further streamlined.

3. Export Growth Trends and Evolution of the Competitive Landscape

    China's polyethylene export potential is significant, in the past. The 5-year compound annual growth rate (CAGR) of exports is 34.5%, primarily due to rapid capacity expansion and cost advantages. In 2027-2028, driven by concentrated release of production capacity, the export growth rate will exceed 22%. The main export destinations are densely populated regions such as Southeast Asia, South Asia, and Africa.

The years 2025-2027 will be a critical window for the transformation of China's polyethylene industry. As the self-sufficiency rate continues to rise, the South China region will achieve supply-demand balance by 2026, and China will gradually shift from being a net importer of polyethylene. This transformation will not only reshape the Asian polyethylene trade landscape but also impact the global market pricing system through price transmission mechanisms. Enterprises need to proactively develop export channels and enhance product differentiation to cope with increasingly fierce homogeneous competition.

Five, Indonesia and the European Union sign CEPA Agreement, Boosting China-India Trade Exports

Indonesia, as the world's fourth most populous country, With a population of 278 million, Indonesia is the largest polyethylene consumption market in Southeast Asia, and its supply-demand structure exhibits significant characteristics. According to Longzhong data, Indonesia's apparent polyethylene consumption in 2024 will reach 2.3 million tons, while domestic production capacity is only 1.17 million tons per year, resulting in a self-sufficiency rate of approximately 51% and an import dependency as high as 61% (1.4 million tons per year).

As the world's largest archipelago country, Indonesia==== With logistical advantages across more than 670 ports, there is a unique geographical advantage in polyethylene trade. On Java Island, 40%-50% of the country's plastic demand is concentrated: Jakarta has a strong demand for packaging materials and construction plastics; Surabaya is an important consumer of industrial plastics; while Bandung stands out in the demand for electronics and tourism products. This regional demand characteristic creates conditions for diversified import sources.

Past Over the past five years, China's exports to the Indonesian region have been increasing annually. In 2024, exports to Indonesia are expected to reach 24,200 tons, a year-on-year increase of 32.41%. Looking ahead, the Comprehensive Economic Partnership Agreement (CEPA) signed between Indonesia and the European Union will provide a strategic window for China's polyethylene exports as a "breakthrough via detour." However, sustainable benefits require deep localization cooperation and technological upgrades.