Lotte Petrochemical on the Move

Plans to invest $5 billion in a petrochemical complex project in Indonesia

The Lotte Group plans to funnel $5 billion (approximately 5.5 trillion won) to construct a petrochemical complex in the seaport city of Merak in Banten, Indonesia.
Lotte Group Chairman Shin Dong-bin met with Indonesian President Susilo Bambang Yudhoyono in Jakarta on Feb. 20 and discussed ways of expanding Lotte’s investment into the Southeast Asian country.
Lotte’s projected massive investments into Indonesia was the first plan, unveiled by Lotte Group, since Vice Chairman Shin Dong-bin has recently been promoted to chairman of the group, coming closer to taking the helm at the conglomerate.
A Lotte Group official said Lotte Group Chairman Shin discussed ways to expand investments with Indonesian President Yudhoyono, and the Indonesia side showed an affirmative attitude toward the group’s offer.
The group’s investment plan calls for Honam Petrochemical, the chemical unit of the Korean conglomerate, to pour $5 billion for the construction of a chemical complex in Merak in a bid to make the industrial real estate a bridgehead for the company to make inroads in Southeast Asia. The ground-breaking ceremony will take place around the end of this year, Lotte officials said.
The Lotte Group plans to expand the capacity of Titan, a Malaysian petrochemical firm acquired by Lotte for 1.5 trillion won last year. Titan is currently producing 450,000 tons of polyethylene (PE) and 38,000 tons of BOPP, raw materials for synthetic resin. If the new facility is built in Merak port, Lotte bets that it could achieve an economy of scale in the region.
Honam Petrochemical set its sights on becoming a global top company with its investments in Indonesia, said Honam officials, adding that its bid to strengthen its presence abroad is part of efforts to achieve a target of posting 40 trillion in 2018 on a consolidated statement basis.
Honam Petrochemical logged 40 trillion in sales in 2010 on a consolidated statement basis. The company ranked second in Asia with a production capacity of 2.47 million tons of ethylene and second with a production capacity of 1.38 million tons of polypropylene and first with 1.8 million tons of polyethylene. If the new facility is completed, Honam Petrochemical will be able to rise to Asia’s No. 1 petrochemical company.
HEIR-APPARENT of Lotte IN KOREA - Shin’s promotion to chairman came 21 years after he began his career in the group and 14 years after he was appointed to be vice chairman, despite his father and Lotte Group founder Shin Kyuk-ho’s advanced age of 89. The junior Shin started his management career in 1990 when he was appointed managing director of Honam Petrochemical Corp. In 1997, he was promoted to vice chairman of the corporation.
But the founder Shin’s position as chairman in charge of overall affairs remains firm instead of the titular title of honorary chairman, signaling that he would continue to tackle pending issues, shuttling between Korea and Japan and keep his grip on the group, not resigning from his position.
The newly installed Chairman Shin has been credited with chalking up a record 61 trillion won in sales in 2010 and tripling revenues in overseas business compared to the previous year, as well as establishing Lotte Group as the fifth largest conglomerate in Korea. The junior Shin himself is the architect of the group’s 2009 vision of becoming one of the top 10 global companies in Asia. nw

Indonesian President Susilo Bambang Yudhoyono welcomes Lotte Group Chairman Shin Dong-bin prior to their talks in Jakarta on Feb. 20.

Photo by courtesy of Lotte Group