Shutdown of Oil Plants: Hurricane in US to Give Reflective Benefits to Korean Petrochemical Industry | BusinessKorea

Saturday, November 18, 2017

Most oil refineries and chemical plants in the area of the Gulf of Mexico in the US were closed down due to Hurricane "Harvey."
Most oil refineries and chemical plants in the area of the Gulf of Mexico in the US were closed down due to Hurricane "Harvey."
SEOUL,KOREA
3 September 2017 - 3:15am
Jung Min-hee

The Korean petrochemical industry is expected to receive reflective profits as Hurricane "Harvey" gave a great deal of damage to the Gulf of Mexico, Texas where the largest oil refinery and chemical industrial complex in US is located. It is reported that Gulf Coast refinery facilities (more than 4.4 million barrels) such as ExxonMobil Baytown (560,000 barrels) and Aramco Port Arthur (600,000 barrels) have been shut down.

Texas is home to 30% of refineries operating in the United States. Refining margins (the difference between crude oil and petroleum product prices) are rocketing as some analysts say that gasoline supply will be disrupted.

According to the Korea National Oil Corporation (KNOC) on September 1, Singapore's combined refining margin exceeded an annual high of US$10 per barrel. The figure was 27 percent higher than US$7.86 on August 23 when Harvey was a tropical storm before growing into a hurricane. Korean oil refiners such as SK Innovation and S-Oil are expected to enjoy stronger profitability as refining margins rise. Even if the hurricane leaves, refining margins are likely to remain strong for the time being as it will take several months to put refining facilities back to work. In 2005, when Hurricane Katrina struck, it took nearly three months to recover damaged refinery facilities and pipelines.

Most chemical plants that produce ethylene and polyethylene were closed down, making it highly likely that Korean chemical companies such as LG Chem and Hanwha Total will receive reflective benefits. It is reported that the production capacities of shut down ECC facilities including plants of Formosa Plastics (1.5 million tons) and Oxychem ECC (550,000 tons) are said to have reached 8.1 million tons. The volume is close to 28 percent of 28.96 million tons of ethylene produced by the US, the world's largest producer of ethylene, per year.

Some analysis says that as the global demand rises, pushing up ethylene margins (the difference between the prices of naphtha, a material and ethylene, a product), earnings of Korean chemical companies will shoot up in the second half of the year. Ethylene margins which averaged US$534 per ton in July increased 37% to US$731 in August.

On the other hand, Korean LPG companies such as SK Gas and E1, which have imported US liquefied petroleum gas (LPG), are deeply concerned about supply disruption and price hikes. Main ports in the Gulf of Mexico have been shut down and LPG carriers have lost access to the ports since August 25th. Saudi Arabia, one of the two largest LPG exporters along with the United States, is also concerned about surging price hikes.

Saudi Arabia’s state-owned oil company Aramco set the September international LPG price (based on car butane gas) at US$500 per ton, up US$40 from US$460 per ton. A rise of international LPG prices this month is expected to raise them in Korea by about 50 won per kg next month.

 

 

Categories: 

Copyright 2013 BusinessKorea Co., Ltd.
301 Samdo Building, 12-1
Yeoido-dong, Yeongdeungpo-gu
Seoul, Korea 150-010
Tel: +82-2-578-3220
Fax: +82-2-578-3224
Email: contact@businesskorea.co.kr

 
 

Web design by: