DL Chem to spend $2 bn on petrochemical expansion

DL Chemical Co., the petrochemical arm of South Korea's DL Group, will spend 2 trillion won ($1.7 billion) over the next five years to sharply boost its overseas production capacity, which will include mergers and acquisitions, a company source said on Sunday.

The world's largest producer of polybutene plans to expand its production complexes in the US, Europe and the Middle East, as part of its push to become one of the world's top 20 chemicals companies. Currently, LG Chem Ltd. is the only South Korean company among the 20 largest chemical producers in the world.

DL Chemical is also aiming to transform itself into a manufacturer of high-value specialty chemicals such as construction and electronic chemicals, which have been enjoying high demand. 

"We're seriously considering making investments to build production facilities abroad, including in the US and Europe," said a DL Chemical source.

DL Chemical, one of the petrochemicals-to-construction conglomerate's two key arms, controlled 23.3% of the world's polybutene (PB) market as of 2020. PB is a raw material of lubricants, adhesives and electrical insulators. It also produces polyethylene used in packaging film, plastic bags and laminates.

Last year, the company acquired Singapore-based Cariflex Pte from Kraton Corp., a US specialty chemicals company, for $530 million. Cariflex produces specialty synthetic rubber and latex used for medical materials such as surgical gloves and rubber stoppers. 

"By expanding our global operations and specialty product portfolio, we will take the leap to become a global chemicals company," its Vice Chairman Kim Sang-woo was quoted as saying.

Its cash and cash equivalents amounted to 920.8 billion won as of end-June, following its rights offering worth 450 billion won in June.

The company's operating profit reached 53.5 billion won in the first half of the year, on course to exceed 100 billion won for the entire year of 2021. This compares with a full-year operating profit of 64 billion won in 2020. 

DL Chemical was spun off from DL Holdings Co., formerly known as Daelim Industrial Co., earlier this year. It is now wholly owned by the holding company.

Recently, it took over full ownership of both Cariflex in Singapore and DL FnC Co., a manufacturer of biaxially oriented polypropylene (BOPP) film, from its parent company DL Holdings. BOPP film is produced by stretching polypropylene film and used as a food packaging material and in electrical applications.

JOINT VENTURES

On top of overseas facility expansion, the company will scale up its investment in joint ventures based in South Korea.

Last week, it set up a JV with US polymer producer REXtac to build a plant to produce eco-friendly hot melt glue in Korea. A hot melt glue is an adhesive that can be melted by heat and used for diapers and industrial products such as automobiles. 

DL Chemical also operates Yeocheon NCC (naphtha cracking center), a 50:50 venture set up in 1999 with Hanwha Solutions Corp., in addition to PolyMirae, a 50:50 polypropylene JV with the Netherlands-based LyondellBasell Industries. Polypropylene is used in automotive components and packaging films.

Yeocheon NCC, located in the southern port city of Yeocheon, produces ethylene and propylene, used for industrial chemical and plastic products, as well as aromatics for use in plastics and synthetic fibers.

Vice Chairman Kim Sang-woo, 55, has been spearheading DL Chemical's expansion plans since he joined then Daelim Industrial as an executive director in 2012. The former executive of SK Telecom Co. is now the youngest vice chairman of the country's 30 largest conglomerate units. 

Its aggressive expansion plan contrasts with other petrochemical companies, including South Korea's SK Group, which have been scaling back on their traditional businesses in a shift towards eco-friendly ones such as renewable energy and lithium-ion batteries. 

SK Innovation Co. recently put on hold indefinitely its plan to sell up to a 49% stake in SK Geocentric Co., formerly known as SK Global Chemical Co., because of a wide price gap with bidders composed of private equity firms.

SK Geocentric runs one of the country's largest NCCs, which produces ethylene and propylene, as well as aromatics such as benzene, toluene and xylene isomers.

Write to Kyung-min Kang at kkm1026@hankyung.com
Yeonhee Kim edited this article.