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T Cabot Indonesia, a subsidiary of the world’s largest carbon black manufacturer Cabot Corporation, plans to invest US$100 million in Indonesia this year to expand its production capacity in order to meet surging domestic demand.

The upgrade of its plant in Krakatau Industrial Estate Cilegon, Banten, would allow the firm to increase its production capacity by 140,000 tons to 290,000 tons, director Gerry Howan said on Tuesday in Jakarta.

At present, Cabot operates two plants — one in Cilegon and another in Sumuranja, Merak, Banten.

“Our current installed capacity is only 150,000 tons, while existing demand is 230,000 tons. For this reason, we want to expand,” he told reporters after meeting Industry Minister MS Hidayat at the ministry.

The firm would allocate its entire output for the domestic market, which would see demand rising to 300,000 tons in the next three years due to the fast-growing automotive industry, Gerry added.

Cabot is currently Indonesia’s sole producer of carbon black — a key material that functions as a pigment and reinforcement in the production of rubber goods, including tires. Around 90 percent of its output goes to local tire manufacturers in addition to other industries, according to the firm.

Due to limited domestic supply, local manufacturers import carbon black from other countries, such as Thailand, India and South Korea. Indonesia’s local automotive industry has grown quickly in recent years as stable economic growth has boosted the purchasing power of the country’s emerging middle class and strengthened demand for cars.

Last year, auto sales hit a new record high of 894,180 units, up 16.93 percent from 2010, according to the Indonesian Automotive Industry Association (Gaikindo). This year, sales are expected to reach 940,000 units, slowing to only a 5 percent increase from last year’s figure as a possible effect of the global economic slowdown.

Gerry further said that the expansion was slated to be completed in mid 2014. In addition to the capacity expansion, the firm aimed to locally source its material, particularly decant oil, an industrial by-product.

“We are currently using imported decant oil. But by 2013, we will obtain it from KS [state-owned steel producer Krakatau Steel],” he explained.

At present, the Boston-headquartered Cabot operates 36 manufacturing facilities in the US and 20 other countries worldwide. Its main products include rubber and specialty grade carbon blacks, inkjet colorants and aerogel.

It has been operating for more than 20 years in Southeast Asia’s largest economy.