Money Today Mon., Dec. 15, 2003SK chemicals will be building a PET chip plant in Europe, becoming Korea?s first organic chemical manufacturer to own a European production base. On December 15, SK chemicals broke the news that it has recently set up its European branch, SK Eurochemicals, and is now proceeding to construct a PET chip plant in Wloclawek, Poland with an annual production capacity of 120,000 tons. The executive authority for the new European corporation was vested on SK chemicals? Managing Director Je-beom U, appointed CEO of SK Eurochemicals. SK Eurochemicals? Poland PET chip plant is due to start operation from April 2005, and will expand its initial production capacity to 400,000 tons by 2007, to provide for a projected sales amount of US $ 130 million, which will represent a 10% share of the total European market. In view of establishing its Eastern-European production base, SK chemicals has been conducting partnership negotiations since late last year with Anwill, a Polish company of good standing, and the European Bank of Reconstruction and Development (EBRD). SK chemicals? successful installation in Poland will give a tremendous impetus to the company?s effort to globalize its PET business and will pave the way for creating footholds in other regions such as Indonesia, China and South America. In the meantime, the SK Eurochemicals project will involve a total investment of US $ 75 million. This corporation with a stated capital of US $ 38 million will have as its major shareholders SK chemicals (63.9%), Anwill (17.4%), LG International Corporation (10%) and EBRD (8.7%), and will be managed by SK chemicals. In exchange for providing technology, equipment and management, SK chemicals will receive 2.5% of total sales as royalty; part of the payment will take the form of equity stakes.. Its Polish partner Anwill will supply land, utilities and local information, and LG International Corporation will be in charge of sales for a portion of the output from the new plant. ?Given the oversupply of PET chips in the Asian market, we have been looking for a new demand source in Europe,? says a SK chemicals official. "The local production base, once completed, will dramatically enhance production cost competitiveness, as prices will no longer reflect import tariffs of 6.5 to 9% and transportation costs,? he explains. ?Eastern Europe, outsourcing 70 to 80% of its PET chips, is a market of vast potential,? he continues. "Establishing SK Eurochemicals is a move beneficial for both SK chemicals and Poland,? he concluded. Reporter Lee Eun-jeong mybang21@moneytoday.co.kr