South Korea’s SK Group hopes to realize its plan to create a joint venture in the polyvinyl butyral (PVB) film business between its petrochemical unit SKC Ltd. and Sichuan Vinylon Works (SVW), a subsidiary of China’s Sinopec Corp., within the year amid signs of improvement in bilateral ties between Seoul and Beijing.

According to the chemical industry on Sunday, the two companies signed a letter of intent in May outlining plans to form a joint venture by the end of the year and are said to be in active talks to reach an agreement.

PVB film is an essential safety film used in bonding glass for automobiles and buildings. Its ability to reduce noise, heat and ultraviolet radiation has made it one of the most rapidly growing high-end petrochemical products.

The PVB film market is dominated by selective producers including U.S.-based Eastman Chemical and Japan’s Sekisui and Kuraray. A new player with enhanced cost competitiveness would have major repercussions in not only the PVB film market but also the automotive industry.

The plan is part of the Korean conglomerate’s decade-long pursuit of lucrative ventures in China.

The relationship between SK and Sinopec began in 2007 when they first engaged in talks to join hands in building a naphtha cracking center in Wuhan, China, capable of producing 800,000 tons of ethylene per year. But the joint venture deal took over six years to finalize as Chinese authorities tend to be reluctant in including foreign players in state infrastructure projects.

The latest talks fall in the backdrop of frayed diplomatic relations over a U.S. antimissile shield, which Seoul installed despite vehement opposition from Beijing. While the diplomatic row has strained ties between SK and Sinopec, insiders expect the deal to come through as both parties agree that it is a mutually beneficial partnership that combines SKC’s PVB film technology and SVW’s steady supply of raw materials.

“The joint venture would leverage the expertise and global networks of the two firms and enable them to secure a sizable share in the market,” said an official from SK Group.

Shares of SKC closed Monday down 2.7 percent at 39,600 won ($35.20).

By Lee Jae-cheol and Kim Hyo-jin

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