SK Group-Sinopec joint venture to start petrochemical production this year

Ethylene facilities built in Wuhan, China, owned by Sinopec-SK Wuhan Petrochemical. [SK INNOVATION]

A joint venture between SK Group and Sinopec plans to start producing petrochemicals at its new facilities in Wuhan, China, in the second half of the year.

Sinopec-SK Wuhan Petrochemical is a joint venture established by SK Global Chemical, a subsidiary of SK Innovation, and China’s major petrochemical corporation, Sinopec, in 2013.

Production of petrochemical products by the joint venture is projected to increase by 40 percent once the facilities run at full capacity, according to SK.

The joint venture announced in 2017 it would invest 740 billion won ($660.7 million) in building more facilities in Wuhan. In 2019, the company announced it would invest 2.2 trillion won to acquire a refining subsidiary of Sinopec.

The full operation of the facilities in the second half of the year will enable Sinopec-SK Wuhan Petrochemical to annually produce 3 million tons of petrochemical products, including ethylene, polyethylene and polypropylene, which are used to make plastic bottles, fiber and car materials.

Ethylene production will be the largest among them all, at 1.1 million tons per year — up 38 percent compared to now.

The price of ethylene, the basic chemical building block of most plastics, has risen more than 180 percent in almost a year, from $399 in April last year to $1,133 per ton in March. This is partly due to the halt in the production of petrochemical facilities in Texas in February as a result of the cold wave. The global ethylene market has also been growing 4 percent annually since 2016, according to SK.

“The management environment is difficult due to Covid-19, but [we] have decided to implement the representative cooperative industrial model between Korea and China without reducing investment or halting the plans,” said Na Kyung-soo, president and CEO of SK Global Chemical, in a statement on Sunday. He further vowed to continuously seek business models to raise the value of the joint venture.

From 2014 through 2020, the joint venture generated 2.33 trillion won in operating profit.

BY JIN MIN-JI [jin.minji@joongang.co.kr] (Korea JoongAng Daily)