SKC, the chemical unit of SK Group, has joined hands with Indonesia’s leading petrochemical producer, Chandra Asri, to expand its burgeoning eco-friendly materials business in Southeast Asia, according to an industry source familiar with the matter on Thursday.

According to the source, Ecovance, a subsidiary of SKC, inked a memorandum of understanding with the Indonesian firm on their business partnership last month. Under the agreement, the two companies plan to develop products using Ecovance’s biodegradable plastic materials, secure new clients together and consider additional investments in efforts to resolve the problem of plastic waste in the Southeast Asian region, including Indonesia.

SKC established Ecovance in 2021 to commercialize its eco-friendly materials business -- one of the three pillars of its future growth drivers, along with battery and chip materials -- as a joint venture with local partners, including food company Daesang and trading firm LX International. At the time, SKC pledged 104 billion won ($80 million) to own a majority stake of 57.8 percent, while Daesang and LX International vowed 40 billion won and 36 billion for a 22.2 percent stake and a 20 percent share, respectively.

Ecovance has been carrying out research and development to commercialize high-strength polybutylene adipate terephthalate, or PBAT, which is seen as an alternative biodegradable plastic due to its non-toxic nature and petroleum-plastic-like firmness made from using nanocellulose extracted from wood.

Ecovance plans to build a manufacturing plant with an annual production capacity of 70,000 metric tons of PBAT in Korea, which would be the second largest PBAT manufacturing facility in the world, according to SKC.

An SKC official also confirmed the new partnership, saying “We expect to contribute to setting up an industrial ecosystem for eco-friendly materials in Indonesia and Southeast Asia overall.”

MarketsandMarkets projects the global PBAT market to reach $2.8 billion in 2027 from $1.5 billion last year with a compound annual growth rate of 13.1 percent as the overall demand increases from emerging markets that need more consumer goods and packaging.

Headquartered in Jakarta, Chandra Asri logged $2.4 billion in annual revenue last year. The latest partnership with SKC comes as it seeks to diversify its business portfolio by fostering its eco-friendly materials business.