Business Drop in China
SK Global Chemical finally scrapped its plan to establish a joint venture to produce butanediol in China, which was halted for three years. SK Innovation seems to be struggling with business in China. Previously, the company decided to delay building an electric vehicle battery factory in China because of regulatory uncertainty in the world's top auto market.
SK Global Chemical, a subsidiary of SK Innovation, announced on November 30 that it has decided to cancel the investment to set up a joint venture to produce butanediol in China. In 2013, SK Global Chemical and state-owned China Petroleum & Chemical Corporation, or Sinopec, announced a plan to invest a total of 3.8 billion yuan (US$579.71 million or 680 billion won) – 1.9 billion yuan (US$289.86 million or 340 billion won) each – in the construction of the plant in the Changshou Economic & Technological Development Zone in Chongqing with a capacity of producing 200,000 tons of butanediol.
The project was part of the Chongqing Butanediol-Acetic Acid Integration Project to constructs a industrial complex that can produce butanediol and acetic acid at the same time using natural gas, based on partnership between SK Global Chemical, Sinopec, and global oil company British Petroleum (BP). However, the price of natural gas rose dramatically and coal-based butanediol suffered from oversupply in the Chinese market. Accordingly, the butanediol market got worsened and the joint venture project fizzled out. An official from SK Innovation said, “We have decided not to make an additional investment as Sinopec requested to discontinue the business. We have invested 10 billion won (US$8.53 million) so far to arrange the plant site.”
Recently, SK Innovation’s joint businesses in China continuously got disrupted. The company planned to jointly construct an electric vehicle battery plant in China with Beijing Auto by the end of this year. However, it decided to tentatively put the plan on hold as the Chinese government is expected to strengthen industrial barriers on foreign firms. The joint businesses in China are the key part of “China Insider,” which is the strategy to push into the Chinese market driven by SK Group Chairman Chey Tae-won.