Sk to sell all shares in sino-korean petrochemical! sinopec expected to achieve full ownership

On September 18th, Zhuangsu World learned that, according to KED Global, South Korea's leading conglomerate SK Group plans to sell its entire 35% stake in the Sino-Korean integrated petrochemical joint venture. The joint venture was established by South Korea's SK Group and China's Sinopec in Wuhan, China. This sale marks SK Group's gradual withdrawal from the troubled bulk commodity chemical sector.

According to reports, the sale of shares is being led by SK Geo Centric, a subsidiary of SK Innovation. The company is currently in discussions with Sinopec, which holds the remaining 65% stake in the joint venture, as well as several other Chinese bidders.

It is reported that the deal is valued at 819.3 billion Korean won (approximately 594 million USD), which is consistent with the joint venture's book value. According to the report, the joint venture was established in 2013 with a total investment of 3.3 trillion Korean won, boasting a petrochemical production capacity of 3.2 million tons per year, including an ethylene capacity of 1.1 million tons per year. At its peak, annual sales reached approximately 1 trillion Korean won.

However, it is reported that the chemical complex has been facing difficulties since 2021. Impacted by the surge in production capacity in China and weak domestic demand, cumulative losses have exceeded 10 trillion Korean won. From 2020 to 2023, China's ethylene production nearly doubled, reaching 60 million tons.

Industry executives have pointed out that SK Group's restructuring efforts have expanded from its home base in South Korea to overseas assets. An executive told KED Global, "SK Group has clearly stated that it will downsize businesses lacking clear prospects, so the possibility of further downsizing its operations in Ulsan cannot be ruled out."

Reports indicate that this withdrawal aligns with SK Group's "ABC" strategy, which focuses on three key areas: artificial intelligence, batteries, and chips. The conglomerate has significantly reduced its commodity chemical business, including the closure of one of its two naphtha cracking plants in Ulsan and is seeking a buyer for the other.

In August, a source disclosed to KED Global that as SK Group accelerates its restructuring to acquire new funds, SK Geo Centric is in contact with foreign petrochemical companies, intending to sell overseas business units previously acquired from Dow and Arkema.

These measures are part of a broader restructuring plan agreed upon by the South Korean government and major petrochemical producers.

Reports cite analysts' opinions suggesting that Sinopec is the most likely buyer of the 35% stake. As the world's largest refining enterprise, Sinopec had a crude oil processing capacity of 252 million tons per year and an ethylene production capacity of 13.5 million tons per year last year.

Reports indicate that fully owning the Wuhan factory will allow Sinopec to streamline its decision-making process and integrate the plant into its vast "refining-chemical" supply chain. Additionally, the Chinese government's increasing scrutiny of foreign ownership in key industries may further prompt Sinopec to seek full ownership.

The funds generated from this sale are expected to be reinvested into SK Group's future growth plans. The conglomerate has committed to investing 8.2 trillion won in the fields of artificial intelligence and semiconductors by 2030, including the construction of a large artificial intelligence data center in Ulsan in collaboration with Amazon Web Services.

A source close to the deal was quoted as saying: "For SK Group, the era of commoditization as a growth engine seems to be over. Its next chapter will be written by artificial intelligence and chips, rather than ethylene."