● On-going negotiations to further pioneer an eco-friendly HPPO process, which targets a global PO market with a net worth of $13.5 billion, is in progress…pushing forward new business potential with hydrogen peroxide.

●​ Evonik, the original technology licensor, and five other global PO manufacturers have their sights on SKC’s reliable plant operation expertise.

SKC is currently in discussion with EVONIK regarding opportunities of global cooperation. EVONIK is the leading German chemical company who owns the HPPO (Hydrogen Peroxide to Propylene Oxide) technology license. The HPPO technology employs hydrogen peroxide (H2O2) as the oxidizing agent to oxidize propylene to propylene oxide (PO) with only water as a byproduct. The only products, in other words, are the desired propylene oxide and eco-friendly water. Such absence of any toxic and hazardous waste differentiates the HPPO process against other competing technologies as the most eco-friendly and economically efficient.

The compatibility of SKC and EVONIK was what ignited and sustained this discussion. SKC’s search to develop new innovative business complemented EVONIK’s ambition to further expand the HPPO technology; needs were met and potentials were maximized for both parties. (EVONIK is the second biggest hydrogen peroxide supplier) We are expecting to see the early stages of the manifested result of such collaboration within this year.

<SKC HPPO Plant in Ulsan, Korea>

The requests for cooperation from 5 global companies owing to SKC’s stable HPPO operation practice

SKC is considering two measures in successfully accomplishing global cooperation. First of all, both parties can embark upon the HPPO plant licensing and O&M (Operation & Maintenance) business. Despite the positive attention the HPPO technology has been receiving globally due to its environmentally friendly advantages, its practical execution continues to be a challenge.

One of two original technology licensors keeps sticking to no collaboration strategy, they enter new market independently by own strategic decision, which in turn, hinders PO manufacturers to bring in the HPPO technology. Commercialization of the HPPO technology has been proven to be difficult even with EVONIK revealing its licensed technology due to the complex and particular application process it requires. A non-SKC manufacturer who has attempted to implement EVONIK’s HPPO technology has reported low utilization rates approximately at 30%.

Meanwhile SKC is the only company in the world to report a recording 100% utilization rate. SKC has successfully operated the method for the past decade, after being the first to commercialize the HPPO production facility in 2008 (just two years after EVONIK introduced the technology). This explains why the industry is showing such strong interest in SKC’s HPPO strategic expertise.

Recently, Chinese PO manufacturers have shown particularly strong interests. This can be attributed to the stronger environmental policy in China, promoting eco-friendly methods by imposing a penalty on environmentally harmful methods. Furthermore, the Chinese government plans to impose a new tax law that charges according to the volume of polluted waste produced, starting next year. Approximately 60% of PO manufacturing facilities in China are currently being run using the chlorine method which emits serious levels of polluted waste. As a result, many of these current PO producers are faced with the dilemma between adopting new, thus more environmental friendly equipment or paying their increased share of taxes according to the new discriminatory imposition law. In this regard, one manufacturer has already shut down its 80,000-ton production facility this year.

SKC has already signed MoUs with a few of the 5 collaboration candidates listed including those in China and the Middle East, while brainstorming with EVONIK the possible measures that could be taken to make such global cooperation successful, such as 1) entering the HPPO O&M business as a new business or 2) directly penetrating into the corresponding location via joint ventures with candidates.

Considering a global hydrogen peroxide business for HPPO…. utilizing the successful JV experience between SKC & Evonik in SEPK (SKC EVONIK Peroxide Korea) 

The second proposition is for SKC to consider the collaboration for the hydrogen peroxide business itself, and become a potential supplier to the HPPO technology. The HPPO technology requires a continuous and massive supply of hydrogen peroxide. The consumption of at least 200kt hydrogen peroxide with minimum purity of 70% is required to yield 300kt of PO product. Hydrogen peroxide plants, therefore, are typically constructed and operated adjacent to HPPO plants. Accordingly SEPK, the JV between SKC & Evonik in Korea for the hydrogen peroxide production is located near SKC HPPO plant

The successful operation of SEPK has triggered the discussion between SKC and Evonik on further expanding the hydrogen peroxide business globally. It is highly unlikely that the new HPPO technology licensees have already an established access to hydrogen peroxide plants of high purity in their vicinity. SEPK operating practices in Korea will contribute to the success of HPPO technology-supplying hydrogen peroxide business worldwide. It also seems to have a high profitability with more than 10% of margin

Both firms are guaranteed staggering increases in not only sales but also margin growth once the strong partnership between the two parties successfully launches the exportation of HPPO technology worldwide. The global PO market shows strong growth potential with a large market size: the status quo production numbers accumulate to 9 million ton per annum, equaling a net worth of $13.5 billon. The HPPO method accounts only for an approximate 16.7% of the total PO market with an annual production of 1.5 million tons, hence bearing huge growth potential. The increase in demand for the HPPO method translates into an increase in hydrogen peroxide, especially. Especially increase in HPPO method will drive an escalation of hydrogen peroxide demand. Hypothetically, if the HPPO method were to occupy half of the global production, the hydrogen peroxide market will increase up to 3 million t.p.a. with net worth of $2.1 billion.

A person related to SKC commented that “SKC is currently reviewing the several strategic options with EVONIK in conjunction with a direct market participation through JV or an newly entry to the O&M business” also added “we are trying to find the mutually beneficial strategy for the both firms’ Win-Win”

PO is a basic industrial chemical for the production of Polyol and PG (Propylene Glycol). Polyol is well known for a raw material for the production of polyurethane which is widely adopted in automobile, construction, furniture & bedding and home appliances industries. Also PG is mostly functioned as a moisturizer in pharmaceuticals and cosmetics. Along with the growth of relevant industries, demand for PO has been increasing by 300,000 ~ 400,000 tons annually. [End]