Mixed Results for Korean Base Oil Refiners


Mixed Results for Korean Base Oil Refiners

S-Oil reported a slight increase in profits for its base oil and lubricants business for the quarter ending March 31, while fellow South Korean base oil refiner Hyundai Shell Base Oil posted a steep drop in profits.


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S-Oil’s business reported operating income of ₩195 billion (U.S. $153.6 million) for the first quarter, a 3% increase from ₩188.9 billion during the same period of 2021.

Revenue jumped 41% to ₩741.7 billion, improving from ₩526.3 billion.

S-Oil makes API Group II and Group III base oils at its plant in Onsan, South Korea, and also sells finished lubricants.

The company said in its earnings presentation that the product spread between base oil composite prices and high-sulfur fuel oil averaged $42.40 per barrel in the first quarter. That was down 32% from $62.50/bbl in the same quarter in 2021. It also continued a downward trend from a peak of $81.90/bbl in last year’s second quarter. The composite base oil price includes Group I stocks. The base oil spread was softened due largely to an increase in feedstock price, which shifted income to the company’s refining segment, S-Oil explained.

Hyundai Shell Base Oil

The joint venture between Hyundai and Royal Dutch Shell reported that operating profit for its base oil business plunged 84% to ₩16.4 billion in the first quarter, compared to ₩103 billion.

Sales for the business declined 15% to ₩261.4 billion in the first quarter, down from ₩307.7 billion.

The 60-40 joint venture between Hyundai Oilbank and Shell produces API Group II base oil at its plant in Daesan, South Korea.

The company expects base oil demand to decrease in the second quarter “in part due to China’s coronavirus lockdown measures, but margins are expected to improve due to increased demand in India and Southeast Asia and insufficient supply due to regular maintenance.”

Projecting further, Hyundai Oilbank said base oil margins will decrease in the third quarter due to the monsoon season in India, which is a major base oil demand source.

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