Highlights
 

• Output hits 2.04 million tons and exports 1.6 million tons in 2024
   
• ANRPC anticipates Indo rubber production to slip by 9.8% in 2025
   
• Chinese tire firms pitching tent in Indo may benefit from trade war

Indonesia’s rubber industry is grappling with a protracted crisis with its output shrinking, exports declining, and processing units falling idle. Land conversion, disease, low smallholder yields, and erratic weather continue to weigh on supply. Exports have dipped for four consecutive years while a decline is forecast for 2025 as well, raising a question mark over Indonesia’s clout in the global rubber market.

“Indonesian output is falling, driven by rubber area converting to more lucrative crops, increasing leaf disease issues, persistently low yields from smallholders, and the growing challenges posed by unpredictable weather patterns,” Dr Lekshmi Nair, senior economist with the Association of Natural Rubber Producing Countries (ANRPC), told Helixtap.

According to ANRPC estimates, Indonesian production declined by 17.5% in 2023, followed by a marginal improvement in 2024 (1% year-on-year) due to higher market prices in the latter part of last year. NR exports volume dropped continuously over the last four years and the market saw a fall of 14% in 2023 and 7% in 2024 (exports reaching a level of 1.6 million tons in 2024).

Many rubber processing factories closed or kept idle

The ANRPC forecasts that Indonesian output is expected to fall by 9.8% to 2.04 million tons this year. Falling total tapped area, low yield per hectare of small farmers, crop shift and erratic weather are likely causes for the output fall to continue. Many rubber processing factories were closed or kept idle, deepening the rubber crisis in the archipelagic country. 

“Indonesian (rubber) exports have fallen continuously over the last four years. Falling Indonesian production impacted the partners’ imports from Indonesia.  China, the third largest importer of Indonesian rubber, saw a decline of around 21% in 2024. Japan and the USA, the two major trading partners, saw imports from Indonesia also falling in 2024,” said Dr Lekshmi.

The first four major rubber export partners of Indonesia are the European Union, Japan, the USA, China, and India.

Source: Helixtap analytics & customs data

Tariff direction unclear but seems advantageous to Indonesia

On how the new trade war triggered by US President Donald Trump would impact the Indonesian rubber and its rubber-based industry and their exports, Dr Lekshmi said escalation of the US tariff for Canada, China, and Mexico has dampened the market sentiments.

“The escalation of an additional 10% tariff for China could benefit ASEAN tire and other rubber products exports to the US market. US being Indonesia’s major export destination of passenger car tires, this additional tariff, effective from 4 March, could potentially expand export volume of its tire and other associated products to the US market. However, the exact implementation of these tariffs remains unclear,” said Dr Lekshmi.

Interestingly, Chinese tire firms are set to take advantage of the tariff edge Indonesia will have over China, due to their premeditated expansionary forays. In a major milestone in its international growth, Chinese tire leader ZC Rubber commenced the Phase I production at its new Indonesian plant, PT. Matahari Tire Indonesia (MTI) in Kendal Industrial Park, Central Java, recently.

ZC Rubber, Sailun set to take advantage

MTI is ZC Rubber’s second overseas plant set up at an investment of US$280 million. The first plant was set up in Thailand in 2015 and the company recently broke ground on its third overseas plant at the Alianza Industrial Park, Saltillo, Mexico, just 250 kilometers from the U.S.-Mexico border.

Spanning 500,000 square meters, the MTI facility is equipped to produce a wide range of products, including truck and bus tires, two-wheeler tires, bias tires, inner tubes, tracks, and carbon black. Once fully operational, it is expected to generate an annual revenue of approximately US$720 million.

The construction on the plant began in January 2024, and in just 233 days, the first all-steel radial tire was produced, while the official production commenced by the end of the year. The company said the achievement set a new standard for industrial projects in Indonesia.

ZC Rubber Chairman Mr. Shen Jinrong emphasized the plant's importance to the company’s global strategy, calling it a cornerstone of ZC Rubber’s commitment to innovation, quality, and sustainable growth. 

“Our goal for MTI is to strengthen its core competitiveness, ensure high-quality product supply, and continuously expand its industry chain,” said Mr.  Shen Jinrong.

“We aim to deepen collaboration across all levels, support local economic growth, and establish a solid strategic foundation for the company’s global development.”

The company, headquartered in Hangzhou, said the new Indonesian facility will boost the company’s ability to deliver high-quality products and enhance its competitiveness in key markets.

Another Chinese tire major, Sailun, is investing over US$ 251 million to set up a tire plant at Jatengland Industrial Park, Demak, Central Java, which is expected to become operational by the end of this year.

It will have the capacity to produce three million semi-steel radial tires, 600,000 all-steel radials, and 37,000 tonnes of OTR tires annually. The move is set to expand the global footprint of Sailun, which operates multiple units in China. The company expects robust financial health for the Indonesian unit with an operating income of $270.21 million.