The evolution of the south-western city of Ulsan in South Korea can be seen as a microcosm for the country’s chemicals industry. Having played a pivotal role in the 1960s as South Korea’s engine for post-war development, Ulsan grew from relative obscurity as an agricultural and fishing village into one of the country’s industrial hubs, thanks to government support for its chemicals industry.

The Ulsan Industrial District, initially formed to support basic petrochemical functions, has grown to encompass the Ulsan Mipo National Industrial Complex and the Onsan National Industrial Complex, which in addition to hosting chemical plants, also houses oil refineries, machinery companies and metal factories.

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Today, the chemicals industry continues to be a key draw for FDI into Ulsan city, as well as other parts of the country. Data from fDi Markets shows the chemicals sector is currently the second largest recipient of FDI in South Korea, accounting for 83 projects worth $7.5bn between 2003 and 2013.

Enduring sector

The decision in 2012 by Japan-based conglomerate Mitsubishi to form a joint venture with Posco Chemtech – a South Korean manufacturer of refractory material and the chemicals arm of the Posco steel-making firm – signifies the enduring strategic relevance of the chemicals industry in South Korea, particularly for foreign investors seeking to diversify their investment portfolios.

The joint venture, known as PMC Tech, also attests to the ongoing vibrancy of South Korea’s chemicals industry, says Lee Kee Chang, president of PMC Tech. As PMC Tech works to consolidate its presence in South Korea, the strong performance of the chemicals sector will continue to make it a draw for foreign companies. “The main shareholders in this venture include Posco Chemtech, Mitsubishi Corporation and Mitsubishi Chemical,” says Mr Lee. “We established this joint venture to secure a stable supply of raw materials, which will ultimately produce needle coke, including coal and tar. We believe this venture will enable us to attain the price competitiveness we require for our products.” 

Based in Gwangyang, in the southernmost tip of the country, PMC Tech is still in its early stages and yet to start production. But from the outset, the partnership appears a good match, given that Mitsubishi can gain from Posco’s extensive distribution network and industrial expertise, and Mitsubishi has deep pockets that can fund the project.

Specialised technology

“The most important thing in our project is the specialised production technology,” says Mr Lee. “We deal with highly specialised raw materials, which at the end point of the production chain are included in the screens of smartphones, for example. So what we deal with is also connected to the semiconductor industry.”

With South Korea’s chemicals industry currently ranked as the most competitive in the Asia-Pacific region, according to a report by Boao Forum for Asia, PMC Tech appears set to become a key driver of growth for South Korea in coming years.

Being located in a country rich with raw materials such as coal and tar, Mr Lee is confident that South Korea’s operating environment holds all the trappings for PMC Tech’s success. “Mitsubishi had considered China as one of its potential investment sites,” says Mr Lee. “Yet the reason why Mitsubishi chose South Korea is its price competitiveness, as well as the quality of the country’s raw materials. When companies look at China, they find variations in the quality of its raw materials and this has an impact on the price. In South Korea, Posco provides 100% of the raw materials and they are equally good in quality. In addition, infrastructure and utilities are very easy to access.”