South Korea's SK Global Chemical Co. and Saudi Basic Industries Corp. (SABIC) have inked a deal to establish a joint venture in Singapore to target the global polyethylene market, the two companies said July 5.
SABIC, one of the world's largest petrochemical groups, signed a 50/50 agreement with SK Group's chemical unit on July 3 to set up the 710 billion-won (US$631.9 million) venture to create a premium polyethylene business with SK's flagship product, Nexlene.
Chairman Chey Tae-won of SK Group has had a big hand in the deal. He thought that it would be nearly impossible for SK Group to explore the global petrochemical market alone, with no raw materials and no experience, and should go for a partnership with a global petrochemical company. The chairman picked Saudi Arabia-based SABIC as the first possible partner, and during his tour of Saudi Arabia in 2011, he met with Mohammed H. Al Mady, the former Vice Chairman of SABIC and discussed matters related to his intention to secure a foreign partner for his group’s petrochemical venture to market nexlene, produced with its own technology. He met with top SABIC executives around 10 times to discuss a joint venture on the nexlene production before his incarceration in 2013.
SK Chemical operates a Nexlene plant with an annual production capacity of 230,000 tons in Ulsan, about 400 kilometers southeast of Seoul. Polyethylene products are used in the automotive, utilities, construction and other industries.
The joint venture will build a Nexlene facility in Singapore and a second one in Saudi Arabia, they said, without elaborating on detailed schedules.
It is the second time that SABIC has forged a joint partnership in Asia, following one with the China Petrochemical Corporation in 2009, the company said.
The new 50/50 joint venture, SABIC SK Nexlene Co., will operate out of Singapore and manage SK’s polyethylene plant in Ulsan with an estimated annual capacity of 230,000 tons.
The agreement came after four years of negotiations between Korea’s top chemicals producer and the world’s second- largest petrochemicals group to jointly enter the global polyethylene market to compete with such global petrochemical giants as Dow Chemical, ExxonMobil and Mitsui Chemicals.
The two partners will use Nexlene, a high performance polyethylene technology developed by SK Innovation.
SK Innovation and SK Global Chemical are contributing their technologies and production facilities to the joint venture SSNC, for 540 billion won in cash.
“SK, with an original technology, and SABIC, with raw material competitiveness and marketing capability, are joining hands to charge into the global market,” SK Global Chemical chief executive Cha Hwa-youp said after he signed the final agreement with Abdulrahman Al-Fageeh, executive vice president of polymers at SABIC, in Seoul July 3.
“We will continue to upgrade our business portfolio with a series of high-value added chemical products to follow up with our Nexlene success.”
SABIC said through the partnership that it will be able to expand its product line and strengthen its operation in Asia. It is SABIC’s second joint partnership in the region, following its deal with the state-run China Petrochemical Corp. in 2009.
“Excellent impact strength, enhanced toughness, superior transparency, low heat seal temperatures, incremental output and improved organoleptic properties are just a few of the competitive advantages that this technology can deliver,” it said.
SK Global Chemical built the nation’s first naphtha cracking facility in 1972, and has maintained its market leadership through continuous facility investment, R&D and technological improvement.
Chairman Chey’s strategy to form partnerships with global petrochemical makers has paid off with SK Innovation lining with Sinopec to build and operate Korea China Petrochemical in Wuhan, China, in 2013 went online from January last year and turned profit of 83.6 billion won in the first quarter of this year.
SK Global Chemical signed a joint venture deal with Japan’s JX Energy to set up an aromatics plant in Ulsan at the cost of 960 billion won, which was completed in last October.
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