Boom in All Three Major Core Businesses: Rubber, Resin, and Phenol
Increased Demand for Acetone, a Hand Sanitizer Ingredient
[Asia Economy Reporter Hwang Yoon-joo] Kumho Petrochemical, which experienced a boom due to the surge in demand for NB latex amid the COVID-19 pandemic, is expected to continue its rally this year. The company is expanding its chemical facilities in response to the sharp increase in demand for acetone and epoxy used in disinfectants and other products.
According to Kumho Petrochemical on the 7th, its chemical business subsidiary Kumho P&B Chemicals plans to expand its acetone production facilities by 56,000 tons in the second quarter of this year. The annual acetone production capacity will reach 420,000 tons, and this expansion accounts for 13.3% of last year's total production volume. Kumho P&B aims to maintain its position as the fifth largest player in the global acetone market with this expansion. Additionally, in the third quarter, the company plans to expand its epoxy production facilities by 20,000 tons, which is about 10% of its annual epoxy production capacity of 200,000 tons.
Kumho P&B is expanding its facilities due to the surge in demand for acetone and epoxy. Acetone is a chemical product produced together with phenol and serves as a basic raw material for IPA, which is used in hand sanitizers. Since the COVID-19 outbreak, the demand for hand sanitizers has increased, causing acetone prices to soar to around $480 per ton. This is more than double the average price of under $200 per ton from 2014 to 2019. Epoxy, a chemical product widely used in durable goods such as reinforced plastics, is one of the products whose demand and margins have surged since the COVID-19 outbreak. Epoxy prices have also recently surged to about $3,000 per ton.
The securities industry expects Kumho Petrochemical's three main business divisions (rubber, resin, and phenol) to all record strong performances, with fourth-quarter results last year significantly exceeding consensus estimates. According to the corporate analysis firm FnGuide, the 2020 performance consensus is sales of 1.2667 trillion KRW and operating profit of 216.4 billion KRW. This represents increases of 5.74% and 1122.6%, respectively, compared to the same period the previous year.
Han Sang-won, a researcher at Daishin Securities, said, "The profitability improvement of major phenol derivatives such as phenol, BPA, and epoxy has also begun, which is positive," and added, "Despite the seasonal off-season and regular maintenance, profits for rubber, resin, and phenol are expected to increase compared to the previous quarter."
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