Samsung Petrochem expands into China without BP

SEOUL, Mar 19 (Reuters) South Korea's Samsung Petrochemical Co. Ltd. (SPC) has opened an office in Shanghai, part of a move to tap into the Chinese market without its major stakeholder BP Plc.

as partner, an official said on Monday.

Samsung Petrochemical plans to open more offices in business centres such as Beijing, and will no longer play middleman to BP in China after the major announced the sale of its stakes in the Korean firm, due to take effect in the first half of this year, the official said.

''SPC was an agent for BP to get into China, but Samsung already has enough network and experience to pave into the market without BP,'' said the SPC official who declined to be identified.

The company is also seeking to expand its business in Southeast Asia, Russia and India, the source said.

Analysts said BP would have to make direct contacts with Chinese firms, setting up local offices in the hubs to sell its purified terephthalic acid (PTA), a raw material used for polyester. Foreign firms are losing ground in China's PTA market as domestic producers are raising production to meet firm demand.

''BP exports most of its PTA products to China and since the market is turning to domestically produced, BP would have to put in efforts to make contacts as Samsung Petrochemical is in a business of its own,'' said J.J. Kim, analyst at Korea Investment and Securities.

BP said it will sell its 47.41 percent stake in Samsung Petrochemical in July, after the major announced in September 2005 a 9 million investment with Chinese partner Fuhua Group Ltd. to expand a plant in China for PTA production.

In the South Korea-based joint venture, three units of the Samsung Group, South Korea's biggest conglomerate, own a combined 47.41 percent and retailer Shinsegae Co. Ltd. holds 5.18 percent.

BP is the world's top producer of PTA, while more than half of Samsung's entire 1.8 million tonnes PTA production is exported to China.

The petrochemical producer has four production plants. The No.1 unit has a 200,000 tonnes per year (tpy) capacity and has been under maintenance since January.

The second plant has a 450,000-tpy capacity, the third has a capacity of 450,000 tpy and the No. 4 is a 700,000-tpy plant.

The company plans to shut down the No. 3 and No. 4 units in May for maintenance, while the No. 2 plant will be shut in October for a turnaround of less than a month.

REUTERS PV HT1618