It has been confirmed that a plant of KEP (Korea Engineering Plastics), which is the top plastic manufacturer in South Korea, has not gone through normal operation for more than a month. It is heard that global customers such as Samsung, LG, Sony, and Ford are looking to secure inventories elsewhere believing that there may be a setback to supply and demand of important materials.
According to chemical industry, part of KEP’s manufacturing lines of its plant in Ulsan has been stopped for about two months. Although KEP initially stopped entire operation, it is heard that KEP has started to operate part of manufacturing lines starting from June.
Fact that KEP is facing a setback with manufacturing of its products is unusual. Polyacetal (POM) that is produced 105,000 tons annually from this plant is exported to 100 different countries. KEP has 12% of the shares of POM market in the world. In South Korea, it has 65% of the shares and it is the top POM manufacturer in South Korea. POM is an important material that is used as a component of state-of-the-art products from electric and electronic industries and automotive industry.
It is confirmed that KEP is not facing any financial crisis or industrial accident. “If a company is late on paying wages or experiences an industrial accident, it is reported to corresponding branch office immediately.” said a representative for Ministry of Employment and Labor’s branch office in Ulsan . “However, we have not received such news from KEP.”
KEP made $301 million (355 billion KRW) and $67.8 million (80 billion KRW) in sales and operating profit respectively in 2018. It only has about $48.3 million (57 billion KRW) of current liabilities that need to be repaid within a year. It is an excellent business.
Some industries suggest that KEP is facing a conflict internally rather than financial difficulties due to a friction between South Korean employees and foreign capitals.
KEP is a business that was established in 1987 by Hyosung (50%) and Japanese capital (50%). Celanese, which is a global chemical business, received entire 50% shares from Hyosung and it has managed KEP since 1999.
“It is heard that KEP employees went on a strike not too long ago and that KEP’s American Headquarter, which was not happy with the strike, had carried out an audit to remove major positions.” said a high-ranking official from the industry. “KEP’s employees opposed the decision made by KEP’s American Headquarter and that manufacturing lines of KEP’s plant in Ulsan have stopped operating while this issue was going on.”
“As management with decisive power was audited by KEP’s American Headquarter, some projects such as facility investment that were in progress were stopped as a result.” said a different representative for the industry. “It is expected that significant time will be required for KEP to handle this issue completely.”
As KEP is going through this issue, its global customers are also in a state of confusion.
It is heard that KEP’s inventories that are worth about $42.3 million (50 billion KRW) are being sent out rapidly due to stoppage of manufacturing lines. Some say that KEP actually has nothing left in its inventory.
“Its customers are asking KEP’s competitors on whether they can delivery same products as KEP.” said a representative for the industry. “It seems that KEP’s customers are taking actions to prepare for uncertainty.”
KEP stated that outside rumors are not true while it is true that there was an internal audit.
“We found few incomplete issues during our audit and we had inspected entire plant for about three weeks.” said CEO John Caamano of KEP. “While we do our maintenance two times during a year, we decided to do it once this year to minimize any negative effect on our output.” CEO Caamano is saying that this maintenance was a normal maintenance to follow required law.
“It is true that some of our customers are experience inconvenience due to the status of our inventory, overall impact is very limited.” said CEO Caamano. “We have quickly resolved most of inventory issue to prevent our customers from leaving us.”
Staff Reporter Ryu, Taewoong | bigheroryu@etnews.com