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[THE INVESTOR] Korean oil refineries and petrochemicals firms are likely to log decent earnings this year due to the widening paraxylene spreads on account of solid demand and dwindling supplies, industry sources said on June 24.
Paraxylene, derived from crude oil, is a raw material in producing polyester, widely used for clothes.
According to the sources, PX spreads stood at US$382.96 per ton this month. The spreads fell below $300 per ton in 2014 due to a supply increase amid sluggish demand, after staying between US$500 and US$700 per ton in the early 2010s.
PX spreads have been widening since late last year, reaching US$418.98 per ton in February, US$426.55 per ton in March and US$408.63 per ton in April.
The break-even point for local refiners is estimated at some US$250 per ton.
The recent surge in PX spreads is caused by some foreign companies suspending their production facilities for maintenance and technical glitches.
No. 1 oil refiner SK Innovation and its affiliates have a total PX capacity of over 3 million tons, followed by S-Oil with 1.8 million tons, Hanhwa Total with 1.7 million tons, GS Caltex with 1.35 million tons and Hyundai Oilbank with 1.18 million tons, sources said.
They noted that the PX spreads will increase down the road as demand for polyester is expected to remain strong.
“Supply of paraxylene in China, the world’s largest buyer, is declining, while demand is rising, which will widen PX spreads,” said Noh Woo-ho, an analyst at Meritz Securities.
Last year, despite global oil prices hitting a record-low due to a supply glut, local oil refiners pocketed satisfactory earnings on the back of improved cracking margins.
The country’s four major oil refiners -- SK Innovation, GS Caltex, S-Oil and Hyundai Oilbank -- logged a combined operating income of 4.79 trillion won (US$4 billion) last year, which presents a four-year high and marks a sharp turnaround from the previous year’s almost 1 trillion-won operating loss.
(theinvestor@heraldcorp.com)
Paraxylene, derived from crude oil, is a raw material in producing polyester, widely used for clothes.
According to the sources, PX spreads stood at US$382.96 per ton this month. The spreads fell below $300 per ton in 2014 due to a supply increase amid sluggish demand, after staying between US$500 and US$700 per ton in the early 2010s.
PX spreads have been widening since late last year, reaching US$418.98 per ton in February, US$426.55 per ton in March and US$408.63 per ton in April.
The break-even point for local refiners is estimated at some US$250 per ton.
The recent surge in PX spreads is caused by some foreign companies suspending their production facilities for maintenance and technical glitches.
No. 1 oil refiner SK Innovation and its affiliates have a total PX capacity of over 3 million tons, followed by S-Oil with 1.8 million tons, Hanhwa Total with 1.7 million tons, GS Caltex with 1.35 million tons and Hyundai Oilbank with 1.18 million tons, sources said.
They noted that the PX spreads will increase down the road as demand for polyester is expected to remain strong.
“Supply of paraxylene in China, the world’s largest buyer, is declining, while demand is rising, which will widen PX spreads,” said Noh Woo-ho, an analyst at Meritz Securities.
Last year, despite global oil prices hitting a record-low due to a supply glut, local oil refiners pocketed satisfactory earnings on the back of improved cracking margins.
The country’s four major oil refiners -- SK Innovation, GS Caltex, S-Oil and Hyundai Oilbank -- logged a combined operating income of 4.79 trillion won (US$4 billion) last year, which presents a four-year high and marks a sharp turnaround from the previous year’s almost 1 trillion-won operating loss.
(theinvestor@heraldcorp.com)
