Buton asphalt: prospect and strategy for asphalt import substitution in Indonesia

Indonesia is the world's largest natural asphalt-producing country, but until now, it has not been utilized optimally. Buton asphalt, used as a road material domestically, only absorbs around 1.74% of national needs; the rest is imported. High dependence on imports will reduce the country's foreign exchange reserves. This study evaluates the potential for using Buton asphalt to meet Indonesia's asphalt needs and reduce imports. The method used is a projected supply and demand analysis using simple linear regression and SWOT analysis to determine strategic steps to resolve problems, including the use of technology, estimates of future domestic demand, and the potential for substitution of imported asphalt. The study results show that supply developments show fluctuations in oil asphalt production during the 2018–2022 period, with total output of one million tons and import volumes decreasing but in value increasing due to price increases. Demand consists of domestic consumption and exports. Domestic consumption in 2019 increased by 1.32 million tons (7.77%) from the previous year of 1.22 million tons. Buton asphalt exports consist of two commodities, namely B 5/20 and raw materials destined for China. Import substitution will be carried out starting in 2024 with a target demand for pure asphalt of 933 thousand tonnes with a substitution of 300 thousand tonnes, saving foreign exchange of around US$576 million. In 2030, domestic production is estimated to have replaced imports entirely, and in 2031, the amount of substitution will exceed the amount of imports by around 101 thousand tons worth US$62.55 million. From 2032 to 2045, adding a new factory with a 100–300 thousand tons capacity is necessary to support increasing domestic demand. The SWOT analysis results show great strengths and opportunities in quadrant I with an aggressive strategy, including increasing production capacity with quality equivalent to imported asphalt and quantities according to substitution needs, supporting transportation infrastructure, and implementing import substitution policies.