LG Chem, ADM to build JV in US to produce bioplastics made from corn

South Korea’s LG Chem Ltd. said on Tuesday it is jointly building a corn-based bioplastic plant in the US with Archer Daniels Midland Co., a global grain processing company, as part of its efforts to pursue sustainable growth.

LG Chem, the chemical unit of LG Group, has signed a heads of agreement (HOA) with ADM, one of the world’s four major agricultural processing firms, to establish the joint venture by 2025 with an annual production capacity of 75,000 tons.

The JV, which will produce polylactic acid (PLA), a raw material used to make 100% biodegradable plastics, marks the first time for a Korean chemical company to build a PLA plant in America.

LG Chem said it expects to sign the definitive agreement with ADM in the first quarter of next year. The site of the factory hasn’t been decided yet.

Financial terms of the deal weren’t known but industry watchers say the factory will be worth hundreds of billions of won.

PLA is a biodegradable material made of lactic acid (LA) that is produced by fermenting and refining glucose extracted from corn. PLA is mainly used for food packaging containers and tableware, and naturally decomposed in just several months by microorganisms under certain conditions.

CARBON-NEUTRAL GROWTH

“The establishment of a joint venture with AMD will be the start of a new journey that goes beyond simple cooperation to lead the transition to a sustainable business structure for the benefit of the environment and society,” LG Chem Vice Chairman and CEO Shin Hak-cheol said in a statement.

“As a leading company for sustainability, we will actively seek new ways to contribute to carbon-neutral growth.”

Headquartered in Chicago, Illinois, ADM has the technical know-how in the production of glucose as a key raw material for bio-based chemicals, as well as fermentation technology using glucose. The company operates crop procurement facilities in 200 countries around the world.

“Our cooperation with LG Chem will create a new opportunity for growth in solutions based on bio-based materials and the enhancement of value for our customers,” said ADM Chief Executive Juan Luciano.

LG Chem said the two companies will expand their partnership to develop other biomaterials and enter into the fast-growing bioplastic market.

According to industry research institutes, the global bioplastic market is projected to grow by an annual average rate of 23% to 34 trillion won ($29 billion) by 2026 from an estimated 12 trillion won this year.

NEW GROWTH DRIVERS

LG Chem, Korea’s top chemical maker, said in July it will invest 10 trillion won in the battery material, renewable and bio sectors through 2025 to strengthen its green business portfolio.

CEO Shin said at the time the company will aggressively seek mergers and acquisitions and launch joint ventures to achieve sustainable growth in the three key growth areas.

Of the 10 trillion won investment, LG plans to spend up to 3 trillion won in the eco-friendly bio sector, including bioplastics.

In 2019, LG Chem signed a joint development agreement (JDA) with ADM, the US grain processing firm, to secure the mass production technology of eco-friendly bio-acrylic acid.

In October 2020, LG said it developed a new biodegradable material using corn-based glucose and crude glycerol that can realize mechanical properties equivalent to synthetic resins for the first time in the world.

Write to Kyung-Min Kang at Kkm1026@hankyung.com
In-Soo Nam edited this article.