SK Chemical Achieves First Vertical Integration in Korean Recycling Business Through Feedstock Internalization

● Establishes a joint venture for a Feedstock Innovation Center in cooperation with Kelinle, a Chinese PET recycling company.
● Aims for plant operation in the second half of 2026 to secure price competitiveness for recycling business through feedstock internalization.

December 10, 2025 - SK Chemical has achieved the first vertical integration of a recycling business in South Korea by internally securing the raw materials required for recycling.

SK Chemical (CEO Ahn Jae-hyun) announced on December 10, 2025, that it will establish a joint venture with Kelinle, a specialized plastic recycling company in Shaanxi Province, China, to build a "Feedstock Innovation Center" (hereinafter FIC) for processing waste plastic.

The FIC will be responsible for processing waste plastic into feedstock. Upon completion of this facility, SK Chemical will possess a value chain covering everything from the production of chemically recycled materials to the procurement of waste plastic. Among domestic chemical companies engaged in chemical recycling such as depolymerization, SK Chemical is the first to establish a corporate entity equipped with waste plastic procurement capabilities.

The two parties plan to establish a production process on approximately 4,000 pyeong (about 13,200 square meters) of idle land owned by Kelinle in Weinan City, Shaanxi Province, China. The process will convert waste into PET pellets through washing, specific gravity separation, and other processes. Kelinle, a company with ten years of local plastic recycling experience, will utilize its local resources to procure raw materials. Leveraging SK Chemical's technological expertise for preprocessing, the JV will produce PET pellets.

Unlike mechanical recyclers that use PET bottles as feedstock, the FIC will be constructed as a facility capable of converting hard-to-recycle waste, such as discarded bedding and fine particles (micro-powder) generated during PET bottle shredding, into feedstock for chemical recycling. Starting with an initial annual PET production capacity of approximately 16,000 tons, the plan is to gradually expand to 32,000 tons per year, supplying the majority of the feedstock required for SK Chemical's Shantou plant.

Securing Cost Competitiveness Through Stable Feedstock Supply
The company anticipates that the establishment of the FIC will significantly enhance the competitiveness and stability of SK Chemical's circular recycled plastic business, which it plans to cultivate as a future growth engine.

The circular recycling business pursued by SK Chemical, based on depolymerization technology, involves breaking down waste plastic into molecular-level feedstock and then reproducing plastic. In this structure, waste plastic plays the role of the foundational raw material, analogous to crude oil in the traditional model. Therefore, stably securing waste plastic at a low cost is a crucial foundation for the recycled plastic business.

Typically, recycled plastic producers procure waste plastic feedstock through external purchases. This structure inevitably exposes them to price volatility and supply instability due to supply-demand conditions or market fluctuations. The industry expects that issues like price increases and supply-demand instability will worsen as global regulations mandating the use of recycled materials are strengthened.

Establishing an internal waste plastic supply system is expected to eliminate feedstock supply uncertainty while potentially enhancing cost competitiveness further. The primary feedstock for the FIC consists of waste materials traditionally difficult to use for recycling and thus often incinerated, such as discarded bedding. Compared to easily recyclable clear PET bottles, this waste can be acquired at a lower cost. The company analyzes that once the FIC is fully operational, it will ensure supply stability for the circular recycling business while potentially reducing waste plastic raw material costs by approximately 20%.

This initiative is also expected to yield environmental benefits by reducing waste, as it enables the reuse of discarded bedding, which has mostly been incinerated or landfilled. Approximately 4.6 million tons of bedding are discarded globally each year, but the recycling rate is reportedly less than 1%.

While discarded bedding offers an advantage in supply cost compared to clear PET bottles, its commercialization for feedstock has been hindered by the higher technical difficulty of re-materializing it. However, SK Chemical will achieve the resource utilization of hard-to-recycle wastes like fibers, cotton batting, and colored PET bottles, based on its chemical recycling process with the world's first commercialized depolymerization technology.

The recycling process based on depolymerization technology differs from physically shredding and reusing waste plastic. It restores waste to a molecular-level raw material state, enabling circular recycling without quality degradation. It also holds an advantage over physical recycling in terms of hygiene concerns.

SK Chemical CEO Ahn Jae-hyun stated, "Through the FIC, we will construct a complete circular recycling value chain encompassing depolymerization, material production, and even feedstock security. The cost competitiveness gained from resourceizing hard-to-recycle items like discarded bedding will help break down the current price barrier where recycled plastic is more expensive than virgin petroleum-based materials."

About Kelinle
Kelinle is a recycled plastics specialist located in Shaanxi Province, China, engaged in the collection, processing, production, and sales of PET flakes from waste plastics. The company not only performs simple material processing but also employs R&D personnel related to recycling. Through industry-academia collaboration with Xi'an University of Technology, it holds a total of 12 patents related to recycling.