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INDONESIA
Indonesian Retreading Industry Growing Despite Challenges
The large Indonesian retreading
about plans for stopping the hot process in the near future, he said, “We will continue with the hot process while shifting towards the cold version in due course of time,” explained K Rachman S, Director, PT Grand Prix Indoagung. Commenting on the market trend in favour of the precure process, Arief Subahari, Director, PT Sinarjaya Rimbawan Asri said, “The hot is on the way out but it is still here and will take some more time to go out completely. Currently, 80 per cent of the Indonesian market is controlled by the precure version and hot has been reduced to 20 per cent.”
The big retreading companies are also investing in advanced equipment, which is a positive sign for retreading. It also indicates that retreading is finding greater acceptability in this market and retreading companies are becoming more modern and hi-tech to meet the growing aspirations of the
Indonesian people. It has been observed that more and more big retreaders are installing expensive shearography machines in their plants. “We installed a shearography machine from German company Steinbichler last year,” informed Arief Subahari of Sinarjaya.
Interestingly, retreading is developing fast in every corner of Indonesia with smaller players thinking bigger and expanding further in newer areas. Banda Aceh based CV Rapi is planning further expansion by building another plant at a place called Meulaboh next year. Meulaboh is about 245 km of South East of Banda Aceh, the capital of Aceh Province. “We will set-up the plant to retread 1000 tyres per month in 2014,” said Abdullah Sami of CV Rapi. The company has two plants in Banda Aceh, located on the Northern edge of Indonesia, which hogged global limelight as the epicentre of the tsunami.
sector is coping with issues such as fierce competition, increasing prices of raw materials and electricity and the rising minimum wage, which in the last three years has further put pressure on already skewed margins. “Raw material prices are up by 20-30 per cent, electricity prices by 25-30 per cent and minimum wages have been hiked by about 40 per cent in the last three years,” said Harianto Ong, Vice Chairman, Crown Retread, Tyre & Rubber Group. But the retreading industry is unable to recover from the hike from the market by passing the hike to the consumers due to fierce competition. “We have not increased prices to absorb hikes at all levels due to the highly competitive environment prevailing in the industry. The price hike would also give an upper hand to backyard minimal of overheads,” Harianto stated.
Indonesia’s biggest retreading company has 42 large and small retreading units spread all across Indonesia and produces 500 tonnes of tread liner every month. Instead of expanding further, it has changed its focus to service. “We have expanded to a level where we can comfortably claim to be a national player. We don’t think there is any more expansion required at the moment or in the near future. Our focus has now shifted towards providing good quality service to our clientele as these customers are key to our survival,” admitted Harianto. With the difficult prevailing market conditions, Crown plans to foray into a non-core sector. “We are planning to enter into a new business shortly, totally different from rubber,” confided Harianto without elaborating.
On the other hand, another significant player and leading rubber manufacturer Supranusa, is planning further expansion with multi-location facilities in Indonesia. Despite increasing competition, Supranusa plans to expand ambitiously by setting-up retreading plants in different parts of Indonesia over the next few years. “We are working on a strategy to have multiple plants in various parts of the country,” informed Rocky Hendrawan W, Managing Director, Supranusa Rubber. The company plans to have two retreading plants initially. Rocky further said, “We are working on strategy to set-up two retreading plants every year. But we have to take into account the prevailing market conditions before embarking on
expansion.” Supranusa hopes to set- up one retreading plant by the end of 2013 and the next in early 2014. According to independent estimates, Indonesia has a market for about 2,000 tonnes of tread liner a month and around 200,000 tyres are being retreaded in Indonesia each month. Over the years, the Indonesian retreading industry has grown in size and stature with a number of new players joining, further intensifying competition in the already stagnant market. “Three decades ago, the number of retreading plants was around 100 but now it is much higher, no conclusive figures being available due to the fragmented nature of the industry,” observed Harianto of Crown.”
The presence of all kinds of Chinese tyre brands in the Indonesian market is hurting the retreading industry and this overwhelming presence has started to be reflected in the lowering of production at some of the biggest retreaders in Indonesia. “We were retreading around 8,000 tyres per month till last year, but now the production has gone down to 5,000 tyres a month,” said Linah, Marketing Manager, PT. Putra Arezda Purnama, Medan. The overwhelming presence of Chinese tyre brands is also creating a shortage of suitable casings for retreading. “Moreover, the price difference between new Chinese tyres and retreaded tyres is merely 30 per cent. Therefore, fleet owners prefer new Chinese tyres over expensive tyres or retreaded tyres,” complained Linah.
Retreaders also believe that the industry is fast shifting from bias-ply to radials and this shift has also threatened the retreading industry. “Radial tyres have got three times more life than bias-ply tyres and a longer life time, less will come through for retreading,” believes Hentono Ongko of Persaudaraan Vulcanisir.
Interestingly, the traditional hot process of retreading is on the way out but has not completely vanished and may stay for sometime as retreading companies are scaling down their hot process operation but have no plans to stop altogether in near future. The price sensitive nature of the market would prolong the stay of the traditional version. Grand Prix Indoagung runs with a majority hot cure production. It sources around 30-40 tonnes of camelback every month from a local supplier. “The hot process has been in decline consistently for the last few years,” he added. When asked
Persaudaraan Vulcanisir to Set-up Tread Plant
Medan based Persaudaraan Vulcanisir could soon foray in the manufacturing of tread liner
as it has become difficult to
compete with retreading
companies that have liner production of their own. It
is surprisingly very
common in the Indonesian retreading industry for a
retreader to produce tread
liner for its own
consumption, which is not
common in the other Far
Eastern markets. “We do
not produce liner for
ourselves and that makes it
a bit difficult for us to compete with other retreaders producing their own liner,” said Hentono Ongko of Persaudaraan Vulcanisir. The retreader plans to build a new plant for tread making in Medan, away from the current retread plant location. He declined to commit any time line for the proposed venture. “We are looking for the retreading market scenario to improve,” he stressed.
Medan is the Capital of Northern Sumatra and is the fourth largest city in Indonesia. It is also largest Indonesian city outside Java. Located on the Northern Coast, Medan is a hub of oil exports. Commenting on the demanding customers, Hentono said, “Customers don’t prefer quality. They prefer the cheapest, which really makes the things difficult.” The company retreads around 2,500 tyres per month, 98 per cent of them are by the precure process. “We have almost stopped the hot process. We do it for select customers once per
week.”
Persaudaraan entered the retreading
32 Retreading Business
business way back in 1987 with the hot cure process and shifted to precure in 2000. Since then the market for hot cure has consistently declined. There are around 17 retreaders in Medan alone and competition is fierce among them to retain clientele. “With the surge in competition, the number of retreaders has remained the same for the past five years. There are few more in the suburbs of Medan, which have small operations with basic machinery,” he said. The company sources ‘Swallow’ brand tread from Medan based Karet Deli, which owns the largest tyre factory in Sumatra.
The retreading industry is threatened by imported Chinese tyres globally and Indonesia is no different. Retreaders also believe that industry is fast shifting from bias-ply to radials and that this shift also threatened retreading industry. “Radial tyres have got three times more life than bias-ply tyres and a longer life time,