Kumho Petrochemical to Increase Synthetic Rubber Production

Kumho Petrochemical has made a total investment of 285.3 billion Korean won (£150.6 million) in extensions to its facilities as part of its goal of acquiring the largest share of the global synthetic rubber and specialty chemical market. A total of 164 billion Korean won (£86.6 million) has been invested in the company’s BR (butadiene rubber) factory and 97 billion Korean won (£51.2 million) in its SBR (styrene-butadiene rubber) plant. A further 24.3 billion Korean won (£12.8 million) has been invested in the company’s specialty chemical plant, where the substance 6-PPD is produced.

When the extensions are completed, Kumho Petrochemical’s annual BR production capacity will increase from 222,000 tons to 342,000 tons, while its annual SBR production capacity will rise from 421,000 tons to 531,000 tons. The company will also produce more than twice its current volume of 6-PPD a year, increasing its capacity from 31,000 tons to 70,000 tons. Extensions to the BR plant are expected to be completed in October 2009. When this goal is achieved, Kumho Petrochemical’s annual production of BR and SBR combined will reach 763,000 tons – meaning that output will surpass that of Goodyear, who currently produce 714,000 tons per annum, placing Kumho Petrochemical at the head of the world list in terms of synthetic rubber production.

Similarly, when the SBR plant extensions are completed in June 2010, Kumho Petrochemical will be able to produce 1,000,000 tons of synthetic rubber a year (including SBS and SEBS, in addition to BR and SBR). This will not only set an industry record, but also put the company well on the road to securing a market share of 20 per cent, the largest in the world.

Kumho Petrochemical claim it will also come out on top when extensions to its specialty chemical plant are completed in August 2008. When this additional capacity becomes available it will replace Flexsys as the world’s leading producer of 6-PPD, with a production capacity of 70,000 tons a year. At present Flexsys produces 65,000 tons of 6-PPD each year.

All the plants in question are located in South Korea (the SBR facility is located in Ulsan, the BR and 6-PPD sites in Yeosu), Kumho having deemed it much more advantageous to invest in plant extensions in Korea as most demand for its products comes from coastal cities in China, and transportation costs are lower when exporting from Korea as opposed to from within mainland China itself (where Kumho Petrochemical is also building production bases). In addition, petrochemicals is part of the process industry, an industry characterised by low labour costs compared to sales revenue. Therefore it is possible to achieve economies of scale. It was also found to be more economical to invest in production facilities all located in one area, such as those possessed by Kumho Petrochemical in Korea.

According to a company spokesperson, “the new plant extensions allow us to be more price competitive by achieving economies of scale…They also prepare us for the huge rise in demand for synthetic rubber and tyres expected in China and other fast-growing countries in Asia. Entering these markets early will give us great competitive advantage and further strengthen our position in the industry.”

BR and SBR are not only used in the manufacture of tyres; the synthetic rubbers play a role in the production of almost all rubber products, such as shoes, golf balls and hosepipes, to name but three. 6-PPD, on the other hand, is an antioxidant that delays the ageing process of rubber. Kumho Petrochemical claims that, compared to other products on the market in the same category, the 6-PPD it produces displays superior dispersibility and processibility that enables a more effective prevention of oxidisation and cracking.

In a further move to enhance its international competitiveness, Kumho Petrochemical has established a sales team in its key market, China, and has also set up an office in Chengdu. New offices have also been established in Frankfurt, Germany and Charlotte, USA. The company’s long-term plans include opening additional offices in Europe and establishing an overseas sales entity as part of its overall strategy to strengthen its sales operations abroad. Kumho Petrochemical states its aim as to provide products and services of the highest quality while also focusing on developing new, high-value high-capacity products so that it can reach its target of achieving a sales revenue of 4 trillion Korean won (£2.1 billion) by 2011.