Vice Chairman Huh Jin-soo of GS Caltex.

GS Caltex launched its local subsidiary in Monterrey, Nuevo Leon, Mexico, to build a plastic compounding plant and sell the product in North America, one of the three major markets in the world for the petrochemical product, the company said recently.

The oil company set up GS Caltex Mexico, S.R. I. in Monterrey, northern Mexico, to manage the construction of the petrochemical plant. Construction in Mexico and in the United States and Canada is scheduled to start in the first half of the year. It would be the first industrial plant built by a Korean firm in the Latin American country.

The oil company already operates similar plants in Lanfang, Suchao, China and the Czech Republic.

South Korea’s second largest oil refiner, GS Caltex Corp., will establish a plastic compounding plant in Mexico in a move to expand into North America, one of the world’s top three plastic compounding markets along with Europe and China.

Plastic compounding refers to diverse chemical formulations made by blending polypropylene and polyaramid with additives like glass fiber and carbon fibers. It is used to make home electronics like air conditioners and refrigerators, and its application has been increasingly expanding into auto components.

The plant will begin operations next year with an annual capacity of 30,000 tons that would generate an about 100 billion won ($82.7 million) in revenue. When the capacity reaches 50,000 tons in 2020, its revenue will increase to 150 billion won.

GS Caltex two plants in China have an annual output of 110,000 tons, the three South Korea plants deliver 90,000 tons and the plant in the Czech Republic 40,000 tons. With the addition of the Mexico plant, the company’s combined production capacity of plastic compounding would grow to 270,000 tons next year, generating about 620 billion won in revenue.

GS Caltex aims to expand production capacity of plastic compounding to 360,000 tons by 2020, the company said.

These plastics draw a high demand globally.

GS Caltex manufactures and sells plastic compounds tailored for diverse purposes under the brand name Hiprene. It currently produces fiber-reinforced thermoplastics for automotive parts including panorama sunroof frames, crash pads and air bags.

Around 2,000 tons of the company’s sunroof frame FRT, which won the SPE Automotive Innovation Award in the U.S. in 2014, have been supplied for some 400,000 vehicles including the Kia Sorrento as of 2015, according to GS Caltex.

GS Caltex is equally owned by Chevron Corp, the second-largest U.S. oil company, and South Korea's GS Energy, owned by GS Holding.

Chairman Hur Dong-Soo said the company should focus on upgrading its domestic facilities to extract more value from residual fuels.

"It usually costs about 1 trillion won to build a 40,000 bpd facility. If we want to do 150,000-bpd, you can imagine how much it costs," he said.

A world map showing where GS Caltex petrochemical plants are in operation or to be built later.(Photos:GS Caltex)