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industry-
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Rubber Industry in Indonesia: Halcyon Agri Corp

indonesia-
halcyon

Enhances Position halcyon-

agri-

agri- corp-
23 June 2014 |
Angsana Capital Ltd (https://www.indonesia-investments.com/tag/item31?tag=4158) ,
Anson Group (https://www.indonesia-investments.com/tag/item31?tag=4157) ,
corp- enhanc
Lee Rubber (https://www.indonesia-investments.com/tag/item31?tag=4156) ,
Robert Meyer (https://www.indonesia-investments.com/tag/item31?tag=4155) , enhances-
positio
Halcyon Agri Corporation Limited (https://www.indonesia-investments.com/tag/item31?
tag=4154) , position/item2
Rubber Industry (https://www.indonesia-investments.com/tag/item31?tag=4153) ,
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Bayu Krisnamurthi (https://www.indonesia-investments.com/tag/item31?tag=2582) ,
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Palembang (https://www.indonesia-investments.com/tag/item31?tag=1619) ,
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Singapore-based rubber producer Halcyon Agri Corporation Limited (HAC) will become the second-largest
producer and exporter of Indonesian natural rubber after it announced to buy nine Indonesian rubber
processing plants (involving USD $360 million worth of investments). HAC is an integrated producer as well
as merchandiser of standard Indonesian rubber and standard Malaysian rubber, which are the most widely
used grades of natural rubber in vehicle tyres manufacturing.

Executive Chairman and CEO at HAC Robert Meyer said that the nine Indonesian rubber processing
factories will be purchased by acquiring the stocks previously owned by Lee Rubber through the latter's
Anson Group.

These nine factories involve four rubber plants in Palembang (Sumatra) with a combined export capacity of
275,000 tons per year. Since HAC already owns two factories in Palembang, total rubber export capacity
from these six factories will reach 385,000 ton per year and thus HAC will become the largest Palembang-
based producer and exporter of crumb rubber (controlling 40 percent of rubber production and export in
(https://www.indonesia-
this city). Palembang is a strategic location for the Indonesian rubber industry as the harbour of this city
handles most of the country’s rubber export.
investments.com)

HAC will use a USD $320 million bank loan disbursed by Credit Suisse AG (Singapore branch) and DBS
Bank Ltd. To nance the remaining USD $40 million, HAC will sell shares of its subsidiary Halcyon Rubber
Company Ltd to Angsana Capital Ltd (a company which is owned by HAC CEO Robert Meyer).

Despite the current low rubber price (USD $1.60 per kilogram), Indonesian Deputy Trade Minister Bayu
Krisnamurthi said that future prospects of the rubber industry remain positive. Therefore, the Indonesian
rubber industry should remain focused on enhancing rubber production, both in quantity and quality. One of
the problems regarding rubber production in Indonesia is that productivity per hectare is very low
compared to other ASEAN countries. On average, Indonesian rubber farmers manage to produce 600 to
700 kilogram of rubber per hectare, whereas in other ASEAN countries this gure is around 2 to 3 tons per
hectare. The industry is also affected by the low quality of its rubber (for example the poor level of
cleanliness), high transportation costs (due to Indonesia’s weak infrastructure) as well as high processing
costs. Therefore, Indonesian farmers now only bene t slightly of their rubber output.

Deputy Minister of Agriculture Rusman Heriawan added that productivity can be improved by replanting,
using better rubber trees, as most of the currently used rubber trees are old.

According to data from the Indonesian Rubber Association (Gapkindo), Indonesia produced 3.1 million tons
of rubber in 2013 (2.4 million tons produced by smallholders, 340,000 tons by state-owned enterprises and
370,000 tons by privately-held companies). The total size of Indonesian rubber estates is estimated at 3.4
million hectares (2.9 million of which owned by smallholder farmers).

Indonesia is the world’s second-largest rubber producer (after Thailand). Most of the country’s rubber is
produced on Sumatra and West Kalimantan. Similar to palm oil, the total size of Indonesia's rubber
plantations has risen steadily in the past decade due to positive prospects of the rubber industry (resulting
in Indonesian farmers shifting away from cocoa, coffee and tea plantations).

Approximately 85 percent of Indonesia's rubber production is exported abroad, mostly (about half of total
exports) to other Asian countries, followed by North America and Europe. The main Indonesian rubber
importing countries are the USA, China, Japan, Singapore and Brazil.

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