Companies boost CD-R prices after US factory burns

Anticipating rising demand in the fourth quarter, CMC Magnetics Corp (中環) yesterday announced it will raise recordable compact disc (CD-R) prices by 15 percent in October.

"The fourth quarter is usually the peak season for CD-R sales," said Annie Yang (楊佳宛), head of CMC's public relations department. "We have seen some positive signs recently, such as lower inventories, strong back-to-school demand and increasing European orders for the coming holidays."

CMC, the world's second-largest CD-R maker, will raise spot prices to US$0.25 from less than US$0.22 per disc. The company expects the price to continue rising during the fourth quarter, Yang said. It has started to inform its customers, including include Royal Philips Electronics NV about the price hikes, she added.

The company, however, downplayed speculation that the price increase was related to a recent explosion at a US-based factory that supplies phenol, a raw material used in CD-R manufacturing.

"That explosion is only one of many factors leading us to raise disc prices," Yang said. "We had considered boosting prices as early as June."

Rival Ritek Corp (錸德), the world's largest CD-R maker, said that the price of phenol, which has risen from US$520 to US$600 per ton, has forced the company to mull raising prices by at least 10 percent in the fourth quarter.

"We believe that the accident will put the price of phenol on an upward trend, which in turn will disrupt market supply and push up CD-R prices," a Ritek official surnamed Cheng said.

Prodisc Technology Inc (精碟), the nation's third-largest CD-R maker, said yesterday that it plans to raise disc prices by 15 percent.

An analyst said margins would remain troublesome.

"The CD-R industry is in a constant state of oversupply," said William Fong (方偉昌), analyst at Primasia Securities Co. "Although companies are introducing higher speed CD-R products and shifting part of their production to more profitable recordable DVD and rewritable DVD disk production, their profit margins are narrowing because of increased competition.''

The factory explosion in the US has simply given manufacturers a reason to

adjust prices, Fong said.

"Other low-end product makers may maintain their current prices in an effort

to expand market share," Fong said. "That could be a concern for major CD-R

makers ... unless demand really picks up in the fourth quarter."

Ritek said last month that it expects to post a net loss of NT$3.25 billion

this year, abandoning an April forecast of NT$2.1 billion in profit, because

of lower-than-expected demand.