SK Chemicals Goes Vertical on Recycling Feedstock — a Quiet Rewrite of Korea’s PET Supply Chain

A strategic pivot: SK Chemicals to secure its own recycled feedstock

SK Chemicals announced a joint venture with Kelinle to build a Feedstock Innovation Center (FIC) in Korea. The core idea is simple: instead of buying recycled feedstock on open markets, the new FIC will collect, sort and process inputs so SK Chemicals can feed its own recycling lines. The company says the plant will begin operations around the second half of 2026, and it positions SK Chemicals as one of the first firms in Korea to link recycling collection and feedstock production directly into its chemical manufacturing chain.

For investors and sustainability analysts, the headline is less about a single plant and more about a strategy shift. SK Chemicals is moving from buying recycled PET feedstock to controlling that supply. That change promises steadier volumes and clearer unit economics — both of which matter if recycled content rules and customer demands keep rising.

What the deal looks like on the ground

The joint venture partner is Kelinle, which will team with SK Chemicals on site selection, plant build-out and day-to-day operations. The FIC’s scope includes collection infrastructure, sorting lines and chemical or mechanical processing steps to turn waste PET into polymer-grade feedstock ready for manufacturing. The site is planned in Korea, with commissioning targeted for H2 2026; the companies have outlined a phased build and test program.

Neither firm disclosed a full ownership breakdown or an exact capex figure in the initial announcement. The operational model, however, is clear: the FIC will channel feedstock directly into SK Chemicals’ downstream recycling and polymer units, prioritizing internal offtake and pricing that reflects integrated supply rather than spot-market swings.

Why owning the feedstock changes the game

Vertical integration matters in recycled plastics for three plain reasons: supply security, cost predictability and margin protection. Recycled PET feedstock can be volatile in price and availability because it depends on collection rates, global scrap flows and demand from other converters. By owning collection and processing, SK Chemicals reduces its exposure to sudden shortages and price spikes.

Cost-wise, the math is straightforward: each step the company internalizes removes a middleman margin and gives SK Chemicals control over processing specifications. That can improve yield and lower per-ton input costs. It also helps protect product margins if the company chooses to absorb short-term market swings instead of passing them to customers.

Strategically, this ties directly to circular-economy goals. Clients that demand higher recycled content often prefer suppliers who can guarantee volumes and traceability. If the FIC delivers on both, SK Chemicals gains a commercial edge versus rivals who still rely on the open market for feedstock.

How this could reshape Korea’s PET recycling market

The FIC’s domestic focus strengthens Korea’s recycling loop by keeping more raw material inside the country. That could tighten available feedstock for converters that depend solely on third-party suppliers, pushing some buyers toward vertically integrated partners. Over time, market share could shift toward companies with in-house collection and processing.

Price dynamics will also change. If SK Chemicals channels a meaningful share of supply into its own plants, it could reduce its willingness to buy at high spot prices, which would put downward pressure on local feedstock bids. Imports and exports will still matter, but domestic supply control gives SK Chemicals leverage in negotiations and lessens its sensitivity to global scrap cycles.

What investors should think about financially

The announcement hints at meaningful capital spending, but the company has not released a capex number. Reasonable back-of-envelope assumptions for a plant with collection and processing could run into the tens to low hundreds of millions of dollars, spent over multiple years. That means near-term capex will rise, but recurring raw-material costs should fall once the centre ramps.

From an earnings perspective, benefits are likely phased: initial costs and ramp-time will suppress margins in construction years, while unit-cost savings and margin protection appear after commissioning and stabilization. If the FIC can cut feedstock cost per ton by a noticeable amount, the impact on gross margin for recycled-PET products could be material — though precise estimates require company disclosures on throughput, yield and recovery rates.

For valuation, the key is timing and scale. Investors should expect SK Chemicals to incorporate FIC-related capex into guidance and to provide target cost-per-ton improvements. If those numbers are credible and the centre hits target run rates, the market might re-rate the stock for higher sustainable margins; if the plan slips or costs overrun, the opposite risk applies.

Execution and regulatory risks to watch

There are several ways the plan can go off-track. Building an integrated collection and processing network involves many moving parts: permitting, community acceptance, construction delays, and technology integration. Joint-venture dynamics add another layer — differing priorities between partners can slow decisions or dilute expected synergies.

Feedstock supply itself can be volatile. Collection yields depend on consumer behaviour, municipal waste programs and seasonal flows. Regulatory permitting in Korea — and any cross-border elements with China or other countries — can add uncertainty. Lastly, reputational and ESG risks exist if feedstock origins aren’t traceable or if processing yields harmful waste streams; transparency will matter for corporate customers and sustainability-minded investors.

Concrete milestones investors should track

Watch the following as checkpoints for whether the plan is creating value: formal capex disclosure and JV ownership split; start of construction; commissioning and trial-run reports; steady-state throughput targets and cost-per-ton disclosures; offtake agreements or internal supply allocations; and any updates to corporate guidance that quantify margin benefits. Analyst notes and regulatory filings tied to the JV will be especially informative.

In short, the FIC is a strategic step that could give SK Chemicals an edge in a tougher, more sustainability-driven market. The opportunity is clear, but so are the execution and regulatory hurdles. For investors, the verdict will rest on numbers — capex, ramp timing and the real cost savings per ton when the plant is running.

Sources

• prnewswire.com