The skyrocketing crude oil price eventually dragged the price of textile raw materials. The Indonesian Fiber and Filament Yarn Association (APSyFI) and the Indonesian Textile Association (API) admit that there has been an increase in textile raw materials in line with the increase in crude oil prices. Quoting Bloomberg, Thursday (25/2) at 19.00 WIB, the price of Brent crude oil for the April 2021 delivery contract rose 0.24 percent to US $ 67.20 per barrel.
Likewise, the price of West Texas Intermediate (WTI) crude oil also shot up 0.28% to US $ 63.40 per barrel. Even at the start of today's trading session, the price of oil touched its highest level in 13 months. However, the strengthening of oil prices had an impact on the increase in textile raw materials, especially polyster.
"Such as Purified Terephthalic Acid (PTA) and Methyl Ethylene Glycol (MEG), which in the last two months has increased by 15%," said Redma Gita Wirawasta, Secretary General of APSyFI. In addition, an increase in polyester will usually have an effect on an increase in cotton and rayon.
For information, currently the local industry can meet 85% of polyester and rayon in the upstream industry. However, for cotton, 98% is still imported. Redma detailed that the total consumption of fiber composition for industry is 40% polyester, 30% rayon, and 30% cotton.
Based on Redma's calculations, the raw material affected by the increase in oil prices in the upstream industry's cost structure is around 55%. "So it has a big influence on the selling price of the product," he said.
Redma explained that the current increase in raw material prices is too fast amidst weak purchasing power. Therefore, the textile upstream party continues to coordinate with the downstream sector both regarding products that are in great demand and the market's ability to absorb products in the midst of current conditions.
Through his monitoring, this week there have been complaints from the downstream, the products are starting to be difficult to sell because demand is starting to weaken again. Redma is worried that if a lot of imported goods are cheap online apparel products, it could be the culprit for local IKM to be hampered so that the demand for fabrics will weaken.
Despite the increase in raw material prices, Redma admitted that so far the upstream textile output has not been affected. "If the output for the upstream industry is still normal, the utilization will be around 80%," he explained.
Executive Secretary of the Indonesian Textile Association (API) Rizal Tanzil Rakhman added that demand for textiles is currently still weak due to restrictions imposed by the government to prevent the spread of the corona virus in the first quarter of 2021.
Meanwhile, the increase in raw material prices in the upstream textile could drag down the downstream textile industry. "Previously, API had received information that in the intermediate sector (yarn and fabric) the price of raw materials had risen," he said when contacted separately.
However, Rizal has not been able to confirm what percentage of the increase in the selling price of TPT downstream products. As an illustration, the increase in downstream products is higher than the increase in raw material prices (above 15%) because there is a margin.
