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Kumho Petrochemical fears for its bottom line due to spike in rubber raw material

Collected: 2017.01.16

Distributed: 2017.01.17

Source: Go Direct

South Korean rubber makers face serious dent in their bottom line due to spike in the key raw material butadiene. The blow could be heavy for Kumho Petrochemical Co. as rubber-making generates half of its revenue.

According to multiple sources from the chemical industry Sunday, the price of butadiene, the staple raw material for synthetic rubber, soared to $ 2,650 per ton in the second week of January, outpacing the synthetic rubber cost of $ 2,475 per ton.

Since the raw material has become costlier than the final product, rubber makers would lose money from production. Kumho Petrochemical Co. turns out 1 million tons of synthetic rubber and LG Chem 420,000 tons a year. LG Chem would be less hurt as rubber makes up 7 percent of its revenue.

Supply shortage has led to the spike in butadiene due to factory shut-down for maintenance and other reasons. The surge in raw material was less of a problem last year as rubber prices also have gone up. But prices have rubber plateaued due to oversupply.

The price of butadiene has risen as much as 243 percent from $771 a year ago.

By Jung Wook

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