Honam, Mitsubishi to set up petrochem plant-paper

SEOUL, April 18 (Reuters) - South Korea's Honam Petrochemical Corp (011170.KS) and Japan's Mitsubishi Rayon (3404.T) will set up a joint petrochemical plant in Yosu, south of Seoul, with an initial investment of $40 million, a local newspaper said on Friday, quoting industry sources.

Honam Petrochemical's spokesman was not available for comment, while an official in charge of investor relations declined to comment.

The petrochemical plant, which is due to start construction in the latter half of the year with completion set for 2009, will have an annual production capacity of 15,000 tonnes of petrochemical products, the Korea Economic Daily reported.

Honam Petrochemical and Mitsubishi Rayon had already set up a joint venture in 2006 to build two petrochemical plants by the second half of this year -- a 90,000 tpy methyl methacrylate (MMA) plant and 40,000 tpy poly methyl methacrylate (PMMA) plant.

The new plant will produce hydroxyethyl methacrylate, which South Korea imports entirely from Japan.

Industry sources said the Asian market may have an oversupply of methacrylate products in 2009-2010 due to new capacity coming on stream in the region.

Asia's MMA demand is expected to be driven mainly by the automobile and liquid-crystal-displays sectors.

Mitsubishi Rayon, Asia's largest MMA producer, also operates MMA plants in China and Japan. (Reporting by Angela Moon; Editing by Anne Marie Roantree)