Kolon Industries jumped more than 14% in early trading on the 28th. Buying is pouring in on expectations that it will reap windfall gains after news that a competitor's modified polyphenylene oxide (mPPO) production facility halted operations.
As of 9:45 a.m. that day, Kolon Industries was trading at 103,000 won on the Korea Exchange, up 13,000 won (14.44%) from the previous session. It rose to as high as 104,900 won early in the session, setting a 1-year high.
According to foreign media reports the previous day, the polyphenylene ether (PPE, same as polyphenylene oxide PPO) resin plant of SABIC, a major Saudi Arabian petrochemical company, has been shut down since early April following Iran's airstrike. PPE resin is a key intermediate material for mPPE (modified PPE, same as mPPO).
SABIC accounts for 70% of global high-purity PPO production. As a result, the likelihood has grown that substitute demand will increase for Kolon Industries' mPPO, a major competitor.
Samsung Securities researcher Cho Hyun-ryeol said, "This situation could allow Kolon Industries' new plant utilization rate to rise faster than expected," and added, "Because SABIC's market share was dominant in the mPPO market for artificial intelligence (AI) copper-clad laminate (CCL) resins, many CCL companies may request additional capacity expansions from the perspective of supply chain diversification."
Kolon Industries' mPPO production capacity amounted to annual sales of 80 billion won as of last year, and will rise to 160 billion won when the new Gimcheon Plant 2 is completed. Gimcheon Plant 2 is scheduled for mechanical completion at the end of the second quarter this year.