Post-China Strategy
After Lotte Group suffered a huge loss due to China’s economic retaliation against South Korea over the deployment of the U.S. Terminal High Altitude Area Defense (THAAD) missile system, Chairman Shin Dong-bin accelerates his plan to tap deeper into Indonesia as a “post China” country.
Lotte Group said on December 21 that it has purchased Indonesian synthetic resin, or acrylonitrile butadiene styrene (ABS), makers. Lotte Advanced Materials Co., the chemical arm of Lotte, has signed a deal to purchase a whole stake in PT. Arbe Styrindo and PT. ABS Industri Indonesia a day earlier.
Lotte Advanced Materials plans to focus on normalizing the two plants' operation and making additional investments for a year after the acquisition in order to boost their combined annual production capacity to 73,000 tons from the current 40,000 tons. The company aims to begin commercial production at the facilities from 2019 and reach an annual revenue of 200 billion won (US$185.19 million) and an operating profit of 15 billion won (US$13.89 million).
Lotte Advanced Materials is the world’s fifth largest ABS producer that has the production facilities with an annual production capacity of 670,000 tons in Yeosu, South Korea. The company plans to jump up to be the world’s fourth largest firm with an annual production capacity of more than 1 million tons through an additional expansion in the future.
Banten is one of the young provinces in Republic of Indonesia in where PT. Arbe Styrindo is located. It is also the region in where Lotte Chemical Titan is pushing ahead its plan to set up a petrochemical complex worth 4 trillion won (US$3.7 billion). Lotte Chemical Titan, which was acquired by Lotte Chemical in 2010, bought the right to use the land of the Titan plant from Indonesia’s state-owned steel maker PT. Krakatau Steel last year and completed the land registration transfer this year. The company considers the establishment of a large petrochemical complex, including a naphtha cracking center that produce ethylene.
In addition, Lotte Advanced Materials also plans to make an investment to build a new ABS plant with an annual production capacity of 300,000 tons in 2022 in its bid to turn Indonesia into a main global base of Lotte Group’s chemical sector.
Lotte has made a total of US$1.2 billion (1.3 trillion won) worth of investment in various sectors of Indonesia, ranging from retail to chemicals and tourism and currently has 8,000 employees working at 12 of its affiliates in the Southeast Asian country.
Lotte expects to rack up some 2.5 trillion won (US$2.31 billion) in sales in Indonesia this year. Chairman Shin has served as economic chairman of Korea-Indonesia Partnership Council (KIPC) from 2013 and a private economic and diplomatic delegate by promoting the relations between the two countries.