"Don’t fear failure. Continue to go out of the country for business,” urged Chairman Shin Dong-bin of Lotte Group as soon as he was named head the 5th biggest business group in Korea in 2011, taking over from his father, whose title was changed to Executive Chairman. Kyuk-ho originally founded Lotte Group in Japan and later in Korea.
The globalization of Lotte Group led by Chairman Shin Dong-bin has been picking up speed since he assumed the top position in the group’s management. The group allocated 7.5 trillion won for investments this year, the most in the group’s history, up some 30 percent from last year. He spends about half of the year overseas to check the group’s overseas operations and also to seek new growth engines for the group. He visited such countries as Vietnam, Indonesia, China and Russia, where the group operates businesses. He also went to the U.S., Germany, France and Canada to search for new businesses that the group might get engaged in with.
He also met with foreign heads of state who visit Seoul for consultations on business matters. He met with three heads of state who visited Korea in May and June such as President Islam Karimov of Uzbekistan, President Narendra Modi of India and Sec.-Gen. Le Thann Hai of the Communist Party of Ho Chi minh City, Vietnam.
In line with Chairman Shin’s strategy for overseas expansion, Lotte Chemical will invest 2.9 trillion won to build an ethylene plant and an ethylene glycol plant in Louisiana in a joint venture with Axial of the United States and Mitsubishi of Japan. It will have an annual capacity of 1 million tons of ethylene and 700,000 tons of ethylene glycol.
When the plants are completed in 2018, Lotte Chemical’s annual production capacity for ethylene will be boosted to 3.7 million tons, surpassing Formosa’s 2.94 million tons to become the largest private ethylene producer in the world.
Lotte Chemical signed an official agreement to set up a joint venture firm to build the ethylene plant in the U.S. on June 18 following a provisional agreement signed in February last year, with the agreement specifying the Korean side to hold 90 percent of the stake in the joint venture while Axial’s share will be 10 percent, although they initially agreed to split the stake evenly. The U.S. partners have an option to increase their share to 50 percent within three years of the new plant’s operation.
Ethylene produced by the new joint venture plant will be split by the partners based on the stakes, however Lotte Chemical will sell 400,000 tons of ethylene to Axial.
The Korean chemical pioneer will also build an ethylene glycol plant close to where the ethylene plant will be built, with the annual capacity to turn out 700,000 tons of ethylene glycol, which will use the ethylene produced by the new ethylene plant as a raw material. Lotte Chemical is in talks with Mitsubishi of Japan to share stakes in the ethylene glycol plant according to the ratio of 70 percent to 30 percent.
Officials of Lotte Chemical said Mitsubishi are to hold a 30 percent stake in the new ethylene glycol plant. The Japanese trading firm has a vast global marketing network for the petrochemical products, adding that cooperation between the two partners would create great synergy in the operation of the new ethylene glycol plant.
They said the company has decided to build the two plants in the U.S. to take advantage of the low raw materials costs to boost profits and also expand the high value-added businesses through their overseas operations, an idea initiated by President Huh Soo-young of Lotte Chemical.
The CEO also announced that Titan Petrochemical, which the company took over for 1.5 trillion won in 2010 as Lotte Chemical Titan, will expand its production facilities.
The Surgil Petrochemical Complex being built in Uzbekistan in a consortium with Korea Gas Corp. and GS Construction will be completed in the second half of this year as targeted. It will start turning out products early next year.
Lotte Group said on May 30 that it had signed a contract to buy the New York Palace Hotel in Manhattan for $805 million from real estate management firm Northwood Investors.
Hotel Lotte Co. Ltd., an unlisted unit of Lotte Group, will lead the formation of a new company that will acquire and operate the Palace, a Lotte Group spokeswoman said.
_신동빈 02.jpg)
