A new petrochemical partnership

Hyundai Oilbank and Lotte Chemical are teaming up in the petrochemical business, agreeing to invest 1 trillion won ($896 million) to set up a joint venture and build a new plant.

The two companies signed a memorandum of understanding yesterday at Lotte Hotel in Seoul to cooperate in the production of mixed xylene (MX) and light straight-run naphtha (LSRN).

Details of the joint venture are expected to be completed at the end of this year.

It will be the first partnership between Lotte Group and Hyundai Heavy Industries Group. Hyundai Oilbank and Lotte Chemical are located next to each other at Daesan petrochemical complex in South Chungcheong.

“Two neighbors have joined hands after lowering barriers,” said Hyundai Oilbank CEO Kwon Oh-gap. “We will strengthen our cooperative relationship not only on raw materials and utilities, but also in new businesses and exploring new markets.”

The new plant is expected to be completed by 2016 and produce 1 million tons of MX and LSRN per year while refining 110,000 barrels of condensates a day.

MX is a raw material for producing benzene, toluene and xylene, which is also a core material for plastics, while LSRN is used to make other petrochemical products.

The two companies have imported most MXs, but after other competitors decided to expand BTX facilities, they decided to form a partnership to ensure long-term competitiveness.

Both companies said the joint venture and new plant will save 2 trillion won a year and generate 3 trillion won in additional sales.

“We are expected to have fierce competition after companies from China and the Middle East decided to expand petrochemical facilities,” said Lotte Chemical CEO Huh Soo-young. “But our partnership will be an exemplary case for boosting competitiveness by forming a strategic alliance that strengthens each company.”

By joo kyung-don [kjoo@joongang.co.kr]