Orion to consolidate two sites in South Korea into one

SENNINGERBERG, Luxembourg—Orion Engineered Carbons plans to consolidate its South Korea carbon black manufacturing operations into one facility.

The firm will close its plant in Bupyeong and consolidate its operations into its plant in Yeosu during the next 20 months, the firm said in a Nov. 4 news release.

When completed, Bupyeong will be dismantled for commercial and residential use. It has the capacity for 45,000 metric tons of carbon black and employs 38.

Orion CEO Jack Clem said in a statement that the pressures of high labor costs, cost and availability of raw material feedstocks, and the company's need to continue improving the productivity of its production network were the major drivers of the decision. Details are to be finalized by the end of 2016.

He added in an email that Orion has informed the work force and the local unions of its plans and will engage in negotiations on transfer opportunities and other restructuring options during the next several months.

“The initiative in (South) Korea is not about closing a plant but is instead targeted at strengthening our production network by consolidating a smaller plant into our larger facility at Yeosu,” Clem said.

“Compared to the Bupyeong plant, our Yeosu facility is located in a highly developed industrial complex and is fully integrated into the cogeneration, harboring and utilities systems of that complex. When completed, we expect our Korean carbon black production capacity for specialty and technical rubber goods to be at least equal to, if not greater than, current.”

Clem said the firm already has converted one of the lines at Yeosu to produce specialty carbon black. The consolidation also will take some additional STM rubber black capacity out of the Asian market.

South Korea and the surrounding markets have been a focus for Orion, and Clem said the region will continue to be key because of the large local presence of polymers, coatings and automotive-related demand.

“With this consolidation to Yeosu, we will strengthen our ability to remain the leader in specialty blacks for Korea and in the region, as well as a major player in the respective tire and mechanical rubber goods businesses,” Clem said.

The executive added that the restructuring in South Korea combined with the firm's move to further build up its specialty carbon black capacity at its new facility in Qingdao, China, positions Orion to better compete in two ways.

First, the consolidated South Korean production expands capacity and at the same time improves the production efficiency for premium grades currently produced in the nation for customers there and around the globe.

Clem added that the investments to complete the transition will be significant, involving both the upgrading of existing units and adding new equipment and systems throughout the Yeosu plant. He said the staff at Yeosu should be able to absorb most of these new tasks, but the details are still being refined.

Second, Qingdao gives Orion the regional operating presence it needs to penetrate the large specialty market in China—which Clem noted is growing more technically sophisticated each year—with competitively produced and shipped materials.

“Our strategy has been to keep our production capacity for specialty carbon black products well ahead of the strong demand we have seen from our markets, especially the stronger demand we are seeing in Asia-Pacific,” Clem said.

“Qingdao gives us the local Chinese production platform we have sought since becoming a stand-alone company in 2011,” he added.

Orion said additional capacity will be shifted to specialty and technically demanding rubber products—such as tires and mechanical rubber goods—during the course of the transition, which Clem added will support the firm's strategy of expanding its leadership in offering higher value-added products. The consolidation is targeted to occur in mid-2018.

“Our Qingdao facility has Orion process technology, which produces some world-class materials and has a strong team that has quickly contributed to the success of not only its traditional higher-end rubber black markets but now also the specialty black markets in the country,” Clem said. “We are continually reviewing plans regarding expanding the site to target additional higher-end products that we believe match our technical capabilities and customer needs. We will share more on that as these plans develop.”

The firm employs 1,530 at 15 production sites and four applied technology centers globally.