SK Lubricants acquired a 49 percent stake in Mekong Petrochemical JSC, Vietnams largest private lubricant company, as part of an expansion bid into the Southeast Asian market. The two companies finalized the agreement late last week.
Under the deal, SK will supply finished lubricant products to Mekong for sale in Vietnam. Mekong will also manufacture lubricant products using SK base oil. In addition, the two firms plan to expand storage capacity, replace old facilities and strengthen their sales network.
A Korean newspaper reported SKs investment to be 50 billion won (U.S. $42.4 million).
Mekong Petrochemical accounted for a little over 6 percent of Vietnams lube market in 2018. Mekong has a manufacturing plant at An Thanh industrial cluster in Long An province, with production capacity of 34,000 metric tons per year. The company also owns two tank terminals, a logistics center and 12 distributors.
The stake purchase deal is to innovate SKs export-driven business growth model into securing a stable supply network in the fast-growing lubricant market, the company said in a press release.
Mekongs manufacturing facilities and sales network on top of SKs brand and technology would make great synergy for rapid growth in Vietnams premium lubricant market, said Cha Kyutak, president of SK Lubricants, at a signing ceremony between the two companies in Ho Chi Minh City, Vietnam.
Seoul-based SK Lubricants is the worlds biggest API Group III base oil supplier and operates joint ventures throughout Southeast Asia in Ulsan, South Korea; Dumai, Indonesia; and in Cartagena, Spain. In 2019, SK Lubricants launched its Zic motor oil brand and motor oil retail outlets in Vietnam.
The Vietnamese lubricant market is dominated by global majors BP Castrol, Shell and Chevron, according to SK Lubricants. Vietnam, with a population of 9.6 million, is the third-largest lubricant market in Southeast Asia following Thailand and Indonesia.
Vietnams lubricant market is expected to jump within the next decade, from 500,000 tons in 2019 to 915,000 tons in 2028, SK said.
Two-wheelers account for 95 percent of transportation in Vietnam, with 46 million registered units.
Engine oil purchases happen more frequently at two-wheeler wash stations than at gas stations or auto repair shops. Automotive sales in Vietnam reached 287,000 units in 2018, a 27 percent rise from 2017.