SK Enmove’s base oils and lubricants business and S-Oils base oils and lubricants business both achieved slightly higher profits for the quarter ended June 30, while joint venture Hyundai Shell Base Oil reported a 110% profit jump. The companies cited factors such as solid price spreads and base oil margins in the quarter.
SK Enmove
SK Innovation reported a second quarter operating profit of ₩259.9 billion (U.S. $199.8 million) for SK Enmove’s base oils and lubricants business, a 2% increase from the second quarter of 2022. The company noted that despite weak demand and subsequent sales contraction, lower oil prices shored up margins in the quarter.
Sales for the business rose declined 10% to ₩1.1 trillion won.
S-Oil
S-Oil’s base oil and lubricants business reported ₩246.5 billion in operating income, down 9% from ₩258.9 billion.
The segment’s reported sales revenue declined 9% to ₩810.5 billion, compared to ₩888 billion.
According to S-Oil, the product spread between composite base oil – an aggregated number including API Group I base oils – and vacuum gas oil was little changed year-on-year at $68.20 per barrel in the second quarter, compared to $68. The spread had peaked at $81.20/bbl in the third quarter last year before gradually declining in subsequent quarters to $67.70/bbl in the first quarter this year.
In its earnings presentation, the company said that the base oil spread remained firm in the second quarter due to seasonal strength and scheduled maintenance by major suppliers. China and India pulled demand over the spring oil change and the summer driving season, the company noted.
Hyundai Shell Base Oil
Hyundai Shell Base Oil, the joint venture between Hyundai and Shell that produces Group II base oil, reported that its second-quarter operating profit surged to ₩61.8 billion, compared to ₩29.4 billion.
Second-quarter sales for Hyundai Shell Base Oil rose 14% to ₩326.1 billion, compared to ₩286.4 billion.
Hyundai Oilbank, which owns 60% of the joint venture, said in its earnings presentation that base oil margins were strong in the second quarter because of reduced supply and low raw material prices, attributed to regular maintenance by base oil companies in the region.
According to the earnings presentation, the spread in the second quarter for API Group II 150 neutral oil was $246 per metric ton in the second quarter, 76% higher than $140/t in the same quarter last year. The spread for Group II 500 neutral was $286/t in the second quarter, 96% higher than $146/t. In its outlook for the third quarter, the company projected that base oil demand would initially be weak due to increased supply, following the end of regular maintenance by Chinese base oil companies, and then expected that demand would pick up in the aftermath of the Indian monsoon season.