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Chemical industry

Hanwha challenges monopoly in S.Korea’s nitric acid sector

Apr 21, 2021 (Gmt+09:00)

Hanwha's chemical plant in Yeosu city, South Jeolla Province 
Hanwha's chemical plant in Yeosu city, South Jeolla Province 

South Korea’s industrial nitric acid sector, currently led by Hu-Chems Co. with around a 90% market share, will see a change in the competitive landscape with Hanwha Corp. entering the market.

Hanwha said on Apr. 19 that it will invest 190 billion won ($170 million) to build a nitric acid production plant by 2023 in Yeosu Industrial Complex located about 300 km south of Seoul.

The new plant will add 400,000 tons to the company’s current annual production capacity of 120,000 tons.

The country’s dominant market leader Hu-Chems currently boasts an annual capacity of 1.1 million tons, which will further increase to 1.5 million tons -- the highest capacity in Asia -- when its new plant is built by 2024.

Nitric acid (HNO3) is a chemical compound produced from the interaction of ammonia, water and a catalyzing agent. The compound is an essential chemical in the semiconductor chip manufacturing and electronic display making processes, during which it is used as a cleanser.

As the semiconductor industry is undergoing a “supercycle” with explosive demand for chips across different industries, the nitric acid market has also been facing a supply shortage since the end of last year.  

Moreover, the price of ammonia, used in manufacturing the nitric acid, reached $480 per ton this month according to the industry on Apr. 20, up 73.3% from $277 per ton at the same time last year. 

The ammonia price is at the highest level since 2014 when it was $566 per ton.

“Not only are semiconductor companies operating their factories at full capacity, so are automakers and interior construction materials firms, which are demanding more nitric acid,” said a chemical industry source.

Nitric acid has multiple other industrial applications when mixed with various chemicals. The acid can create di-nitrotoluene (DNT) when mixed with toluene, and mono-nitrobenzene (MNB) when mixed with benzene.

DNT and MNB are base materials in making polyurethane, a chemical compound widely used in the interior finishings of cars, furniture and office buildings.

The nitric acid industry has been considered as a market with high entry barriers, due to the high initial investment costs and extreme flammability of the material. Such barriers had allowed Hu-Chems to enjoy a virtual monopoly in the segment for decades, based on long-term contracts with Hanwha, Hanwha Solutions, OCI and BASF Korea.

The chemical industry says that demand for nitric acid will likely continue to grow alongside the economic recovery expected this year.

It is also reported that both domestic and overseas companies have recently been signing long-term contracts with nitric acid suppliers one after another to secure volume ahead of the competition.

“This investment in nitric acid production will accelerate Hanwha’s expansion into new business segments in fine chemicals, such as semiconductor cleaners,” said a Hanwha official.

Write to Kyung-Min Kang at kkm1026@hankyung.com

Daniel Cho edited this article.

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