As Lotte Chemical Corp. has decided to establish a joint venture with GS Energy Corp. to produce bisphenol A (BPA), South Korean BPA producers which have been supplying their products to Lotte Chemical has been put on emergency alert. Lotte Chemical has purchased BPA from LG Chem Ltd., Kumho P&B Chemicals Inc. and Samyang Innochem Corp. to produce polycarbonate, which is a transparent plastic sheet.
Lotte Chemical has thus far met 95 percent of its annual BPA demand with supplies from South Korean producers, while it imported only 5 percent from foreign companies. Currently, South Korean BPA manufacturers include LG Chem with an annual production capacity of 450,000 tons, Kumho P&B Chemicals with an annual production capacity of 450,000 tons and Samyang Innochem with an annual production capacity of 150,000 tons. Kumho P&B Chemicals is working on expansion of its plant by 200,000 tons a year. The project is to be completed in the second half of 2021.
Nearly 800,000 tons of BPA produced by the three companies is being consumed in the domestic market. Lotte Chemical and Lotte Advanced Materials Co. use 310,000 tons of BPA a year according to data from 2018.
As Lotte Chemical and GS Energy are planning to set up a plant in South Korea to produce 200,000 tons of BPA, domestic chemical companies which have been supplying BPA to Lotte Chemical now need to secure overseas markets. However, experts say that domestic BPA producers don’t need to worry about securing demand for their products for a while since domestic production of polycarbonate is on the increase.
The domestic polycarbonate production capacity totals 640,000 tons, including 240,000 tons of Lotte Advanced Materials, 170,000 tons of LG Chem, 120,000 tons of Samyang Kasei Co. and 110,000 tons of Lotte Chemical. Lotte Chemical is planning to expand its polycarbonate plant in Yeosu by 110,000 tons in the second half of this year.
Lotte Chemical’s annual BPA demand is estimated at 430,000 tons in 2023. As the company is pushing to ramp up its polycarbonate production, it has to secure an additional BPA supply. This has led it to join hands with GS Energy to set up a BPA joint venture. An industry analyst said, “BPA suppliers to Lotte Chemical will have to find a new market when Lotte Chemical directly produces BPA and expand its output in the future.”
However, a somewhat positive fact is that China has been carrying out a considerable number of new polycarbonate production expansion projects from the beginning of this year. China’s polycarbonate production capacity is expected to rise 6 percent over the next five years. Therefore, BPA supply will be tight after 2020. This seems to be a favorable factor for Korean BPA manufacturers. But export costs will be higher than those of directly supplying the product to domestic companies through pipes.