■ Executing investments without major changes despite COVID-19 situation
■ Partial operation started from last year’s end, full operation will begin in the second half
■ Securing production capacity of 3 million tons of petrochemical products in the 2nd half of 2021, a 40% increase in capacity
– 1.1 million tons ethylene, 0.9 million tons polyethylene, 0.7 million tons polypropylene, 0.19 tons butadiene
– In response to surging ethylene prices and market conditions, expecting to contribute to increasing business values of SK-Sinopec
■ CEO of SK Global Chemical Na Kyung-soo: “We’ll constantly discover and expand industrial cooperation model between Korea and China”
Sinopec-SK Petrochemical Co., Ltd., a joint venture of SK Global Chemical (a subsidiary of SK Innovation) and Sinopec, which is the biggest petrochemical company in China, plans to complete its expansion of new petrochemical facilities and start operation in full throttle in the second half of 2021. With this plan to implement the expansion without major changes in the investment plan despite difficulties caused by COVID-19 crisis, the company is solidifying its position as the representative petrochemical company in China by massively increasing the production capacity for chemical products and preemptively responding to the market situation of rising prices.
In October 2017, Sinopec-SK Petrochemical had announced an additional investment plan worth a total of 740 billion won to expand petrochemical facilities for 300,000 tons of ethylene, 300,000 tons of polyethylene, 300,000 tons of polypropylene, and 60,000 tons of butadiene. This investment money came from the revenues that Sinopec-SK Petrochemical has raised independently.
The company completed the extension of ethylene production facilities in December last year, and successfully carried out the initial operation. These facilities are maintaining an operating ratio of around 90%. Polypropylene and butadiene facilities have been completed in March and are in operation without major issues. In particular, Sinopec-SK Petrochemical plans to produce high quality, high value-added High Crystalline Polypropylene (HCPP) with improved strength from the new extension of polypropylene facility. The extension of polyethylene facility will be completed by June, and go into operation from the second half of the year.
When the expansion of petrochemical production facilities is completed in the second half of 2021, Sinopec-SK Petrochemical will secure annual production capacity of 3 million tons of petrochemical products, including 1.1 tons of ethylene, 0.9 million tons polyethylene, 0.3 million tons polypropylene, and 0.19 tons butadiene. This is approximately 40% increase from 2.2 million tons of petrochemical production capacity Sinopec-SK Petrochemical used to have.
Ethylene and propylene are also known as the “grains of petrochemical industry” because of their broad utilization in home appliances, clothing and car interior materials. The global market for ethylene has been showing a steady growth of more than 4% per year on average in 2016 to 2020.
The petrochemical industry anticipates that this expansion of petrochemical facilities will benefit Sinopec-SK Petrochemical in the chemical products market for ethylene and propylene.
Recently, ethylene markets have shown an upturn trend in prices, boosted by the expectation for recovery after the global supply of COVID-19 vaccine, and supply shortage caused by the stoppage of massive petrochemical facilities after the cold snap in Texas in February.
Ethylene prices have plummeted to US 399 dollars per ton as of April 2020 in the midst of COVID-19 situation, and regained strength to US 1,133 dollars per ton as of March 2021. The ethylene spread (ethylene price – naphtha price), which is used as an index for ethylene products, has increased by more than 2.6 times from 205 dollars per ton in April 2020 to an average of US 538 dollars this March.
Chairman Chey Tae-won of SK Group regards Sinopec-SK Petrochemical as one of his core businesses under the China Insider strategy, and the largest petrochemical joint project in the history of diplomatic ties with China since 1992. Ever since the discussions for establishment began in 2006, Sinopec-SK Petrochemical overcame the difficulties of global financial crisis in 2008, and was founded 7 years later in October 2013. SK Global Chemical and Sinopec invested a total of 3.3 trillion won to the ratio of 35 to 65.
From the initial year of commercial operation, Sinopec-SK Petrochemical recorded sales profit of KRW 147.7 billion, and by reaching approximately KRW 2.33 trillion in sales profit in just 7 years of launching the factory, the company is rewriting the history of SK Group’s success story under the global partnering strategy.
CEO Na Kyung-soo of SK Global Chemical said, “Despite difficult business environment due to COVID-19, we wanted to fully implement Sinopec-SK Petrochemical’s investment plan without any reduction or suspension because it is the greatest industrial cooperation model between Korean and China”, “After completing the facility expansion, SK Global Chemical will consistently discover and expand industrial cooperation models between two countries, contributing to enhance the corporate value of both companies.”
Meanwhile, by taking over Wuhan Refinery from Sinopec China in 2019, Sinopec-SK Petrochemical achieved the “Refinery-Chemical Integration”, which is propelled by the Chinese government as a new growth engine. Located in Qingshan district of Wuhan, Wuhan Refinery has a daily refining capacity of 170,000 barrels. Through this joint venture, SK Global Chemical indirectly owns refining facilities in China and is participating in actual management of Chinese refinery and petrochemical factories for the first time among Asian companies.
[Attachment] Ethylene price / ethylene spread tendencies
[Attachment] Changes in production capacity of Sinopec-SK Petrochemical
(Photo 1) Sinopec-SK Wuhan Petrochemical’s plants under construction for expansion last year
(Photo 2) Sinopec-SK Wuhan Petrochemical’s plants when the expansion was completed