Minister of Industry Airlangga Hartarto paid attention to Michelin tire products at the inauguration of PT Synthetic Rubber Indonesia in Cilegon, Banten (11/29) - Photo by the Ministry Office

JAKARTA (TheInsiderStories) – Indonesia just launched its very first-ever synthetic rubber factory, PT Synthetic Rubber Indonesia (SRI) located in Cilegon, West Java, said industry minister on Thursday (11/29). The factory costs US$437 million and will produces poly-butadiene rubber and solution styrene butadiene rubber.

SRI owned by Italian Michelin and its local partner PT Chandra Asri Petrochemical Tbk (IDX: ASRI), with 55 percent and 45 percent ownership respectively.

The potency of synthetic rubber is considered a big advantage. In the automotive sector, synthetic rubber can contribute around 25 percent to one vehicle. The products is also one of the products receiving holiday tax fiscal incentives, so as to boost exports.

The factory will use butadiene feedstock produced by PT Petrokimia Butadiene Indonesia, a subsidiary of Chandra Asri, with an estimated capacity of 120 kilotons per annum of styrene butadiene rubber solution.

However, to meet the needs of Mixed C4 as feedstock to produce Butadiene, management of CAPC will increase the production of Ethylene, Propylene, Py-Gas, Mixed C4, by expanding production facility of Naphtha Cracker, which is underway.

In its initial phase, most of the output would be exported to markets such as Thailand and China, and later shifted to domestic markets, when local consumption picks up.  The collaborative facility will secure butadiene, the core raw material to produce synthetic rubber, from Petrokimia Butadiene.

On another front of its business, holding company PT Barito Pacific Timber Tbk (IDX: BRPT) is also exploring opportunities to open new rubber plantations in Jambi and South Kalimantan, according to President Director of Chandra Asri Agus Pangestu. The area currently under its assessment covers between 60,000 and 80,000 hectares.

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.

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.

SRI’s plant is expected to reduce dependence on imported raw materials of tire and to support increased national tire production.

Barito, owned by prominent ‘Orde Baru’ tycoon Prajogo Pangestu, enjoyed its heyday in the timber business during the rule of his business crony, the late former President Soeharto.