Chemicals:Butadiene price hikes bode well for NCCs
Butadiene prices have been rebounding rapidly, rising last week by 8.1% to endSep 8 at USD1,470/tonne, and despite jumping 61.5% since early August, we seeadditional upside given the likelihood of sturdy inventory restocking ahead ofChina’s Golden Week holiday over Oct 1-8.
In the wake of Hurricane Harvey, many US refiners and chemicals firms areresuming operations this week, with refiners seemingly more resilient to suchdisruptions—eg, leading player LyondellBasell said its production will normalizefrom October, which should cut deep-sea volume shipments from the Middle Eastbound for Asia in the near term.
We expect the chemicals market to remain robust for now, backed by tight globalsupplies due to Hurricane Harvey. China’s environmental and safety regulationtightening should eliminate the concern that North America’s new ECC capacity(that will come online this year) will bring about long-term oversupply. Amid thesefavorable industry conditions, Korean chemical shares are likely to stay on anupward trajectory, with NCC players Lotte Chemical and Korea Petrochemicalremaining our top picks. We recommend caution on Kumho Petrochemical,however, since SBR price hikes owe to jumps in those for SM and butadiene.