SK Geo breaks ground on $1.4 bn plastic recycling cluster

South Korea’s SK Geo Centric Co. on Wednesday broke ground on a waste plastic recycling complex to transform itself into a green petrochemical producer with a future growth driver in the eco sector, amid slowing growth in the chemical sector stemming from global oversupply.

SK Geo Centric, formerly SK Global Chemical, started construction of the Ulsan Advanced Recycling Cluster (ARC) with an investment of 1.8 trillion won ($1.4 billion) in the refining and petrochemical complex of its parent, SK Innovation Co. in the coastal city 400 kilometers (250 miles) southeast of Seoul.

SK Geo Centric is slated to complete work there by the end of 2025 and begin recycling some 320,000 tons of waste plastics a year starting in 2026. That amount is about 9% of all trash incremented or landfilled annually in Korea, said SK Innovation, the country's top energy company.

Currently, only uncontaminated plastics are recycled, but the Ulsan ARC will process a greater variety of wastes including contaminated plastics and textiles.

“The Korean chemical industry will leap forward once again based on a new future growth engine — recycled plastic,” said SK Geo Centric CEO Na Kyung-soo at the groundbreaking ceremony for the complex.

PRE-ORDERS

Global beauty, fashion, food and beverage makers such as L'Oréal S.A. and Evian have already placed orders to buy 30% of annually recycled plastic from the Ulsan ARC, according to SK Geo Centric.

The company is known to have agreed with those customers to sell the products at prices double or triple those of materials manufactured via the existing process.

This comes as the European Union requires that plastic packaging contain 10% to 35% recycled content, depending on the application, by 2030.

SK Geo Centric aims to sell 70% of its output from the cluster even before construction is completed. It plans to leave the rest for sales later, amid expectations that product prices will rise higher, even though it could sign supply deals for all of its production.

“Supply is absolutely short compared with demand in the market,” Na told reporters on Tuesday.

The global plastic recycling market was forecast to grow to 600 trillion won by 2050, Na said, quoting research from consulting firm McKinsey. SK Geo Centric expects the market to top that prediction, however, Na said.

“Once the new cluster is fully operating in 2027, we are likely to log operating profit of 250 billion won to 300 billion won based on sales of more than 700 billion won,” Na said, indicating its operating profit margin would be around 40% — far higher than those of all domestic industries including the petrochemical sector.

OVERSEAS FACILITIES

SK Geo Centric expected few competitors in the waste plastic recycling sector as the company has secured strong technological competitiveness for the business.

With cooperation from Canada’s Nasdaq-listed Loop Industries Inc., the US’ PureCycle Technologies and the UK’s Plastic Energy, SK Geo Centric plans to implement three advanced recycling technologies at the Ulsan ARC: pyrolysis, high-purity polypropylene (PP) extraction and depolymerization.

Those processes are likely to allow the company to cut costs and manufacture products quickly for customers.

SK Geo Centric is in talks with waste plastic recycling plants in Europe, Asia and China relating to its operational experience at the Ulsan ARC. The company aims to invest 450 million euros ($489.2 million) with two French companies to build a plant with a 70,000 ton annual capacity by 2027.

“We are looking into measures to raise money for overseas facilities, although we do not have any issues with the South Korean plant,” Na said.

Write to Hyung-Kyu Kim at khk@hankyung.com
 
Jongwoo Cheon edited this article.