International Oil Prices Fall Below US$100 Mark, Petrochemical Stocks Plummet

Recently, second-tier petrochemical stocks that had soared with oil prices, including Tairay Chemical, Asia Polymer, and Delta Petrochemical, all closed at their daily limits today. China General Plastics also fell sharply by NT$1.7 or 9.66%, closing at NT$15.9.

Among the benchmark Formosa Plastics Group's four major companies, except Nan Ya Plastics, whose stock price rose by half a limit due to electronic materials accounting for over half of its revenue, the rest—Formosa Plastics, Formosa Chemicals & Fibre, and Formosa Petrochemical—all closed in the red. Formosa Petrochemical, located upstream in the industrial chain, was most directly affected by oil price fluctuations, closing down NT$2.5 or 4.4% at NT$54.3 today.

Reports citing unnamed regional officials stated that the US and Iran agreed to a two-week ceasefire, which includes allowing Iran and Oman to charge transit fees for ships passing through the Strait of Hormuz.

Petrochemical industry analysts believe that if the news is true, although paying transit fees would increase costs, it is relatively manageable compared to the Strait of Hormuz being almost completely blocked for over a month. At least ships can pass, and oil can be transported.

The news of the temporary truce between the US and Iran caused international oil prices to plummet. For example, Brent crude oil futures prices fell below US$92 per barrel during trading on the 8th, a sharp drop of about US$17 from the 1st, a decline of over 15%.

The volatility of oil prices most directly affects upstream refining and cracking plants, such as Formosa Petrochemical and CPC Corporation, Taiwan. Both inventory and in-transit crude oil and finished product values face impairment. This will also lead to a decline in downstream petrochemical product prices, affecting companies like Formosa Plastics and Tairay Chemical.

Formosa Petrochemical General Manager Lin Ke-yen emphasized that these inventory and in-transit raw material and product profits are merely adjustments in financial book figures, not actual operating profits or losses. Previously, when oil prices surged, Formosa Petrochemical benefited from inventory gains; now that oil prices have pulled back, Formosa Petrochemical faces inventory depreciation losses. These are all changes in book figures, and the company views them with equanimity.

At a recent joint investor conference for Tairay Chemical and Asia Polymer, in response to concerns from institutional investors about petrochemical product prices soaring due to the war, Tairay Chemical and Asia Polymer were expected to benefit from low-cost inventory. Asia Polymer Business Department Manager Huang Ke-ming also frankly stated that it indeed helped the company's profits in the short term, but if the war ends and the market reverses, what goes up will come down. Therefore, the company's operations do not specifically factor this in. (Editor: Chang Chun-mao) 1150408