FocusKorea PET bottle chip demand to rise

22 August 2007 03:52  [Source: ICIS news]

By Hong Chou Hui

SINGAPORE (ICIS news)--Korean domestic demand for polyethylene terephthalate (PET) bottle chips is expected to grow nearly 10% in the fourth quarter due to LG Household & Health Care’s purchase of a Coca-Cola unit, producers and traders said on Wednesday.

“We signed a formal contract to buy Coca-Cola Bottling Korea Co from Coca-Cola Amatil this week,” a LG Household spokeswoman said.

“LG Household will have a 90% stake in the company while the remaining 10% will be owned by Coca-Cola’s parent company in Atlanta. The deal is expected to be completed in late October,” she added.

The purchase is expected to cost LG Household won (KRW) 400bn ($423.46m) with the price inclusive of Coca-Cola Bottling Korea’s debt of KRW120bn, she added.

Coca-Cola Bottling Korea currently utilises 40% of its annual capacity of 100m cases of drinks to produce carbonated soft drinks.

LG Household revealed that plans are in the pipeline to fully utilise the plant’s production capabilities by expanding its product range to include mineral water, fruit juices and bottled tea upon completion of the deal.

Korea’s domestic market currently consumes 200,000 tonnes of PET bottle chips annually. The additional demand from Coca-Cola Bottling Korea is expected to add another 18,000 tonnes or 9% annually to domestic Korean demand for PET bottle chips.

Coca-Cola Bottling Korea purchases equal amounts of PET bottle chips from two suppliers in Korea. The company then uses the chips to make pre-formed bottles for its drinks, market sources said.

“Coca-Cola Bottling Korea buys an average of 500 tonnes of PET bottle chips from us on a monthly spot basis. We sold 350 tonnes of PET bottle chips to them for August,” said a Korean PET bottle chip producer.

While declining to reveal the price that was concluded with the Coca-Cola unit, he disclosed that it was around the level of the current Korean domestic price of $1,344/tonne DEL.

He added that Coca-Cola Bottling Korea has not informed its suppliers of additional requirements for PET bottle chips.

LG Household’s previous venture into the consumer beverage business ended in failure when the beverage division was closed down in 1996 before LG Household was spun off from its parent company, LG Chemicals.

The purchase of Coca-Cola Bottling Korea ends a two year search by LG Household for a suitable re-entry vehicle into Korea’s beverage market which began in 2005.

($1 = KRW944.60)

By: Hong Chou Hui
+65 6780 4359

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