Institutional Research Note
Indonesia’s Polyethylene Deficit & Why $FPNI–LCI Integration Is Structurally Transformative

Indonesia faces a long-standing structural deficit in Polyethylene (PE), with annual domestic demand far exceeding local production. The entry of Lotte Chemical Indonesia (LCI) and its strategic integration with Lotte Chemical Titan Nusantara (FPNI) represents one of the most material industrial shifts in Indonesia’s petrochemical landscape over the past two decades.

We view this integration as a high-conviction structural theme that may re-rate FPNI’s long-term earnings power and positioning within the sector.

1.Indonesia’s PE Deficit: A Structural Issue, Not Cyclical

PE demand (Indonesia):
2.0–2.2 million tons per year

Effective domestic supply:
Only 800–900 thousand tons, primarily from TPIA and FPNI.

Import dependency:
Indonesia imports 1.1–1.3 million tons annually ,one of the highest import gaps in ASEAN.

Drivers of demand:
Food & beverage packaging
Consumer goods
Ecommerce logistics
EV Automotive plastic components

Demand is growing 5–7% annually; without domestic expansion, the deficit will widen further.

Conclusion: Indonesia fundamentally requires additional domestic PE supply.

2.LCI–FPNI Integration: A New Domestic Value Chain Anchor

LCI (Upstream):
New ethylene cracker
1 million tons/year capacity
Advanced energy-efficient technologies
Designed for 90–100% utilisation
2023–2025 commissioning

FPNI (Downstream):
PE manufacturer
450–500k tons/year PE/LLDPE capacity
Previously constrained by ethylene shortages
Operating utilisation historically 50–65%

Strategic integration impact:

Before LCI After LCI
Ethylene supply uncertain Dedicated supply 10 years
High feedstock cost More stable & efficient feedstock
Volatile utilisation Utilisation 85–95% achievable
Limited earnings visibility Structural EPS expansion

This integration mirrors the early phase of what Catapulted TPIA into a multi-decade growth trajectory.

3.Quantifying FPNI’s Role in Reducing Imports

When LCI operates fully and FPNI utilisation reaches 85–95%:
Incremental PE availability:
+300,000 to 350,000 tons annually
This alone covers 25–30% of Indonesia’s PE import gap.

Strategic implication:
FPNI becomes a nationally important PE supplier, materially reducing import reliance and stabilizing domestic supply for fast-growing industries.

4.Earnings Re-Rating Story for FPNI

LCI’s feedstock integration directly enhances profitability:

Lower feedstock cost
Ethylene purchased from LCI is more stable and operationally efficient compared to imported feedstock.

Higher utilisation = higher operating leverage
Petrochemical plants have strong fixed-cost leverage.
A utilisation increase from 65% → 90% can lift net earnings disproportionately (30%+ impact).

Resulting 2026 forecasts (institutional fair-case):
Revenue: Rp 8.18 – 8.42 trillion
EBITDA: Rp 3.0 – 3.12 trillion
Net profit: Rp 1.71 – 1.94 trillion
EPS: 421 – 427
Free float remains low (~7.5%), magnifying potential re-pricing if earnings materialize.

5.Positioning vs. $TPIA

TPIA remains the sector leader, but FPNI begins a new structural phase
FPNI is not competing head-to-head with $TPIA, it is entering a similar integration path from a lower base, which historically creates disproportionate re-rating potential.

5 Investment View

Why FPNI is relevant for institutional portfolios:
1.Structural earnings inflection post-integration
2.Domestic substitution theme replacing imports
3.Low capex requirement strong free cash flow trajectory
4.Favorable industry structure (duopoly: TPIA + FPNI)
5.Supportive macro narrative: Indonesia’s growing packaging & consumer sector
6.Potential policy tailwind for reducing chemical imports
7.Attractive forward valuation (PER 4–5x vs sector 15–30x)

With the commissioning of LCI and rising utilisation at FPNI, Indonesia gains one of the most efficient new PE production chains in ASEAN.
FPNI becomes a crucial domestic supplier capable of reducing national import dependency, while simultaneously entering a multi-year structural earnings expansion cycle.

This puts FPNI in a rare position:
a duopoly market, rising utilisation, asset-light model, and an inflection in earnings visibility ,a combination the market often prices aggressively once confirmed.