Advanced subsidiary’s Korean JV likely to boost propylene prices

SK Advanced’s joint venture with PolyMirae to build a polypropylene (PP) plant in South Korea will ensure sales of propylene as feedstock to the new project, Advanced CEO Abdullah Mogbil Al Garawi told Argaam.

“We will guarantee consuming 400,000 metric tons of propylene, accounting for more than 60 percent of SK Advanced’s output. This would reduce supply in international markets and that might lead to an increase in prices,” Al Garawi said.

Earlier this week, SK Advanced Company, which is 30 percent-owned by Saudi-listed Advanced Petrochemical Company through Advanced Global Investment Co, signed a pact for a $420 million polypropylene (PP) plant in South Korea. The project will have a production capacity of 400,000 tons of PP.

SK Advanced, which produces 660,000 metric tons of propylene per year, is located near the new JV. This will allow easy transport of feedstock without incurring transport and shipping costs, Al Garawi said, which is better than selling the products in international markets.

The project will produce a special polypropylene material that has a higher price than regular PP, he said, adding that demand is rising for this product.

The new JV will also open new opportunities with LyondellBasell, one of the world’s biggest PP producers and co-owner of PolyMirae, through the use of its production technologies in the future, he said.

The joint venture company will be able to obtain loans through mortgages or other guarantees, which would provide 60 percent of the project cost of $420 million. SK Advanced and PolyMirae will be able to cover the remaining 40 percent, or $168 million, Al Garawi said.

SK Advanced has sufficient liquidity and solvency to get short-term loans in order to cover its share of the capital, without needing any support from Advanced or SK Gas, he added.

Asked about his expectations on product prices, the CEO noted that demand is more important.

“All reports indicate a 4-5 percent annual growth in demand for polypropylene. With increasing demand and reduced supply due to not building plants, prices will rise, so we shouldn’t worry.”