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Monday, September 16, 2002
Ineos Phenol plant fire to have limited effect on Taiwan CD-R disc makers

A recent explosion at a US plant of Ineos Phenol, a unit of British chemical supplier Ineos Group, will have limited impact on the raw material supply for Taiwan’s CD-R disc makers, according to some disc makers here. The plant outage, nevertheless, has come at an opportune time when two major players are to make price moves next month. The accident, which may lead to a temporary jump in phenol prices, makes the price hike look like a validation of higher costs in producing discs.

Phenol is a chemical used to make naphthol, one of the several compounds found in polycarbonate (PC). PC, in turn, is the main ingredient for CD-R disc substrates, and takes up 60-70% of a disc’s material costs.

Some of the Taiwanese disc manufacturers surveyed told DigiTimes they did not learn of the Ineos fire until reports started surfacing in the Chinese-language press over the weekend, which suggested phenol quotes have leapt from a per-kilo US$520 to US$600.

Leading disc maker Ritek said even if PC prices rise, it is still confident of negotiating favorable rates with suppliers by leveraging its purchasing power.

CMC Magnetics, the world’s second-largest CD-R manufacturer, said it has not seen any impact from the plant explosion. Separately, it said it would bump up CD-R prices by 15% in October, following the delay of an increase scheduled for September. Ritek, in response, said it will implement new pricing “that matches CMC’s” but declined to give details.

Prodisc Technology, another major disc maker, citing its custom of locking in supply contracts 6-12 months in advance of production, said price movement in the short term is not much of a worry.

For smaller disc companies, the picture is a bit mixed. Since they usually carry small inventories, when PC prices go up they are caught in a difficult situation: either absorb the increase head-on or buy less PC material, thus saving costs but risking not being able to completely fulfill orders.

GigaStorage said it does not rule out “strategic discussions” with bigger disc competitors for supply should PC prices go up in the near future. Lead Data maintained that its material inventory level is adequate, and that any rise in PC prices probably will not arrive until the fourth quarter.

A company press release said following the explosion, Ineos Phenol is increasing production at other facilities “to maximum output.” Without indicating whether there will be any price changes, the unit is “in the process of working out a supply plan for all its contractual partners” to minimize the impact.

The report estimated damage from the explosion, which took place at a decomposition unit on the morning of September 9 in the Mobile, Alabama-based plant, at US$10 million.

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