Lotte Chemical officially launches joint venture with GS Energy

17, Feb. 2020

Image by Thanks for your Like • donations welcome from Pixabay
Image by Thanks for your Like • donations welcome from Pixabay

SEOUL, AJU - A joint venture between Lotte Chemical, a major chemical company in South Korea, and GS Energy, an energy service provider, was officially launched this week, underling efforts to ride out a tough business environment which has been hit by global oversupply, declining margins and intensifying competition.

Lotte Chemical said in a regulatory filing on Thursday that the joint venture, Lotte GS Chemical, will be headed by Lotte Chemical managing director Yim Dong-hee in charge of new business development. Lotte Chemical completed its initial capital payment of 163.2 billion won ($138 million) to the joint venture and secured a 51 percent stake. GS Energy had a 49 percent stake.

The new joint venture, based in the southern industrial port of Yeosu, will invest 800 billion won by 2023 to build a plant capable of producing 200,000 tons of BPA units and 210,000 tons of C4 fractionation products annually.

BPA is a starting material for the synthesis of plastics. BPA-based plastic is made into a variety of common consumer goods, such as plastic bottles, CDs, and DVDs. Epoxy resins containing BPA are used to line water pipes, as coatings on the inside of food and beverage cans. C4 products are used to produce butadiene, a synthetic rubber material, and tertiary-butyl alcohol (TBA), a synthetic marble material, through extraction with hydrocarbon compounds.

Through its joint venture, Lotte Chemical aims to secure cost competitiveness and strengthen the competitiveness of its petrochemical business through cooperation with an oil refiner. GS Energy hopes to strengthen its portfolio by supplying propylene, benzene and C4 products for the joint venture through its sister company, GS Caltex, which will open its olefin production facility in Yeosu in 2021.

On expectations that the petrochemical industry will rebound, Lotte Chemical has been at the head of strategic and proactive expansion by the domestic petrochemical industry, a pillar of South Korea's export-reliant economy.

On Thursday, LG Chem, a major producer of petrochemical products and batteries for electric vehicles, said it would issue corporate bonds worth 900 billion won for investment in expanding the production of high-value polyolefins and upgrading its naphtha cracking center in Yeosu.

"The successful issuance of corporate bonds this time is due to investors' positive assessment of our future growth," LG Chem CFO Cha Dong-seok said. "In the future, we will actively push for upgrading our business structure in all business sectors to secure the world's best business competitiveness."

In Yeosu, LG Chem produces basic petrochemicals such as ethylene and propylene, which are the base materials for petrochemistry. Polyolefin sheets or foams are used in a wide variety of packaging applications, sometimes in direct contact with food. Polyolefin waste can be converted into many different products, including pure polymers, naphtha and clean fuels.