South Korean oil refiners and petrochemicals firms are expected to report better earnings for the first quarter of the year on the back of higher cracking margins and stronger demand, industry sources said Thursday.
They said SK Innovation, the country’s top refiner, is likely to log an operating income of 547 billion won ($468 million) during the January-March period, up from 321 billion won a year earlier.
SK Innovation headquarters in Seoul. (Yonhap)
No. 3 player S-Oil Corp. is also expected to see a 77 percent jump in its first-quarter earnings to 421 billion won.
LG Chem, the country’s leading chemicals company, is forecast to post an operating income of 469 billion won in the first quarter, marking a 30 percent rise from the year before.
The improved earnings are attributed to improved cracking margins and widening ethylene and paraxylene spreads.
In 2014, major South Korean oil refiners posted their worst-ever performance as a freefall in oil prices hurt the value of their crude inventories amid tight cracking margins.
But in 2015, major refiners including GS Caltex Corp. and Hyundai Oilbank posted a combined operating income of 4.79 trillion won, which was a four-year high that marked a turnaround from the previous year’s losses.
The refining margin had stood at between $7 and $8 per barrel last year, higher than the average $5 posted in 2014, which led to massive losses for local refiners.
Paraxylene spreads stemming from higher demand and reduced supply also helped South Korean oil refineries and chemicals firms post better earnings.
(khnews@heraldcorp.com)