Paraxylene production to increase with the amendment of Foreign Investment Promotion Act

With amendment of the Foreign Investment Promotion Act, the global demand for the chemical substance is projected to increase approximately 7% each year in the near future. The SK and GS Groups is also expected to be speed up its paraxylene production.

The SK Group’s sub-subsidiary company SK Chem and the GS Group’s GS Caltex signed MOUs with JX Energy, Showa Shell, and Taiyo Oil of Japan in 2011 and 2012 to dominate the market in advance. However, they could not complete the construction of the plants due to the delay in the passing of the revised bill, which is expected to result in new investments of over two trillion won (US$1.9 billion).

SK Chem, which is a subsidiary of SK Innovation, is already building production facilities with an annual capacity of one million tons. The facilities are scheduled to be completed in the first half of this year, when SK and JX Energy will kick off their joint business in earnest at a total investment of 960 billion won (US$913 million). About 50% of the investment will be borne by the Japanese company.

GS Caltex is going to expand the annual capacity of its paraxylene production plant located in Yeosu City, South Jeolla Province to one million tons, as well. The total investment is one trillion won (US$9.5 billion), 500 billion won (US$476 million) of which comes from by Showa Shell and Taiyo Oil, which is expected to be a boon to the current sluggish performance of the local petrochemical sector. Once completed, the plant of GS Caltex is the largest factory of its kind in Korea.

The Foreign Investment Promotion Act was revised at this time so as to further facilitate large-scale corporate investment activities. According to the revision, a subsidiary company’s shareholding limit in a sub-subsidiary company is set to 50% when a local corporation and a foreign company set up a joint venture so that the Fair Trade Act regulations can be circumvented. The idea is to allow up to 50% of the investment to be made by the foreign company so that big businesses can have a lighter burden in large-scale investment.

The global demand for paraxylene is predicted to grow 7% a year. Chinese chemical companies are increasing their production capacity in this context. According to industry sources, China is likely to be able to supply 100% of its own demand for paraxylene by 2020.