SK Trading International invests in Daekyung O&T to secure SAF feedstock

SK Trading International announced Oct. 17 that it is investing in Daekyung O&T, a company specializing in waste- and residue-based raw materials such as used cooking oil (UCO), animal fats and palm oil mill effluent (POME).

The investment is the company’s move to secure raw materials for sustainable aviation fuel (SAF) derived from biomaterials.

SK Trading International signed a share-purchase agreement Oct. 16 for equity investment in Daekyung O&T.

For this contract, SK Trading International formed a consortium with Korea Development Bank’s Private Equity Division and Eugene Private Equity.

The three companies plan to establish a special purpose acquisition company (SPAC) to acquire a 100 percent stake in Daekyung O&T.

Within the SPAC, SK Trading International will hold a 40 percent stake, while Korea Development Bank and Eugene PE will collectively hold the remaining 60 percent.

The detailed terms of the shareholding structure were not disclosed due to contractual obligations.

Established in 1995, Daekyung O&T specializes in the production of waste-based raw materials at its 13 business sites across South Korea.

It is the country’s largest company supplying raw materials, such as animal fats from slaughterhouse waste and UCO from restaurants and food factories, for biobased diesel fuels including SAF.

Animal fats and UCO are gaining attention as key raw materials for SAF as the market expands.

“These materials are not subjected to global regulations due to their waste-recycling nature, and they offer greater carbon-reduction benefits compared to plant-based raw materials …” SK Trading International stated.

“SK Trading International views this investment as leverage for securing raw materials for [SAF],” the company continued. “Unlike ground transportation, which is transitioning to batteries and fuel cells as fossil-fuel alternatives, aviation transportation is constrained by battery-density limitations and safety, making the use of liquid fuel unavoidable for the future. As a result, nations worldwide are exploring alternatives, such as biofuels and synthetic crude oil, to reduce carbon emissions throughout the aviation fuel consumption process.”

SK Innovation subsidiaries had previously invested in synthetic crude-based SAF companies Fulcrum and Infinium in 2022.

This March, SK Trading International invested in Sichuan Jinshang Environmental Technology, a Chinese UCO company.

Established in 2017, Jinshang is the largest UCO supplier in the southwestern regions of China, including Sichuan, Yunnan and Guizhou provinces.

The company said it has been proactively expanding its production scale as it recognizes the prospect of the SAF market.

With the subsequent investment in Daekyung O&T, SK Trading International said it has “secured the foundation for securing a supply of [SAF] raw materials in both South Korea and China.”

SK Trading International CEO Suh Sok-won said, “Proactive preparation for the SAF market in line with the ‘Carbon to Green’ strategy of SK Innovation and its subsidiaries is absolutely essential for the sustainability of the aviation fuel market. SK Trading International’s efforts will not stop at investing in Daekyung O&T. We will continuously make efforts domestically and internationally to evolve into a specialized trading company that provides a stable supply of SAF to the domestic and global aviation industry.”