The Jakarta Post
Indonesia's major petrochemical producer PT Chandra Asri Petrochemical plans to begin construction of a Rp 5.6 trillion (US$435 million) synthetic-rubber plant in Cilegon, Banten, early next year to take advantage of growing tire demand both at home and in other Asian countries.
The firm is selecting contractors to build the plant and preparing the site ahead of starting the project, according to Agus Salim Pangestu, the president director of Chandra Asri's parent company, PT Barito Pacific.
'We hope commercial operations can begin in the first quarter of 2019,' he told reporters after meeting Industry Minister Saleh Husin.
The plant would have the capacity to produce 120,000 tons of synthetic rubber each year, Agus told The Jakarta Post separately in a text message.
In the initial phase, most of the output would be exported, to markets such as Thailand and China, and later shifted to the domestic market when local consumption picked up, he added.
The project will be run by PT Synthetic Rubber Indonesia, a joint venture between Chandra Asri's wholly owned subsidiary, PT Petrokimia Butadiene Indonesia, and major global tiremaker, France-based Michelin, with 45 percent and 55 percent share-holdings respectively.
In the collaboration, the facility will secure butadiene, the core raw material to produce synthetic rubber, from Petrokimia Butadiene.
On another front of its business, Barito is also exploring opportunities to open new rubber plantations in Jambi and South Kalimantan, according to Agus. The area currently under its assessment covers between 60,000 hectares and 80,000 hectares.
Barito, owned by prominent tycoon Prajogo Pangestu, enjoyed its heyday in the timber business during the rule of his close friend the late former president Soeharto.
During the meeting, Michelin's chief procurement officer Luc Minguet, who accompanied Barito's president director, expressed the French firm's interest in further investing in Indonesia, according to Saleh. 'The firm revealed its serious commitment to investing in the tire industry and bring its own brand, Michelin,' Saleh said.
He added that the firm was interested not only in tapping the potential of the domestic market, but also in making Indonesia a regional manufacturing hub for exports.
Indonesia's attraction as a production base has already lured the world's seventh-largest tire producer, South Korean Hankook Tire to set up a $353 million tire factory in Cikarang, West Java.
With a capacity of 4.3 million tires per year, 70 percent of the factory's output is shipped to North America, the Middle East and Asia.
National annual tire production currently exceeds 75 million, but with the robust growth in car and motorcycle production in Southeast Asia's biggest economy, there is still enormous room for growth.
Michelin, which has a strong portfolio of premium tire products, said late last year that it might acquire a brand of budget tires to diversify its business, Reuters reported.
At present it already controls cheaper brands such as BF Goodrich, Kleber and Uniroyal, and while still focusing on high-end tires, Michelin might buy an entry-level brand in Asia when the opportunity arose, CEO Jean-Dominique Senard has said.
'We hope commercial operations can begin in the first quarter of 2019.'
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