The oil refining industry is starting to emphasize business in non-refining sectors due to the weakening of refining margins and other industry downturns.
Since most of the refining sectors have suffered big losses in Q2, companies are turning to business diversification to relieve risk and create new growth power.
According to the oil refining industry on August 18, GS Caltex Corporation and S-OIL recorded operating losses in Q2 oil refining sectors. SK Innovation affiliate SK Energy also showed a 90% drop in its business profits compared to the same quarter from last year.
Due to the refining margin decrease, oil price reductions, and inventory losses, SK Energy’s business profit dropped to 38.7 billion won (US$34.4 million), a drop of 345.3 billion won (US$307 million) from the previous quarter. GS Caltex and S-OIL also lost 130.3 billion won (US$116.2 million) and 59.4 billion won (US$53.0 million) each.
Hyundai Oil Bank also had a tough quarter after its sales dropped 14% compared to the same period from last year.
On the other hand, petrochemistry sectors accomplished stable business profits, recovering some of the losses from the refining sectors.
GS Caltex marked a business profit of 175.2 billion won (US$156.3 million) which is 23.7% higher than last year. This actually turned the end result into profit-making. SK Chemicals and SK Lubricants also showed an increase in their business profits of 226.3 billion won (US$201.4 million) and 29.2 billion won (US$26.0 million) each.
S-OIL also accomplished a 99.6 billion won (US$88.6 million) business profit through its petrochemical business with Para-xylene (PX), despite its losses in the refining sector.
For the 4 domestic oil refining companies, the average sales contribution is 70%-90% refining and about 20% petrochemistry.
Seeing from the recent industry performances, the trend of the 20% success covering for the 80% loss has been continuing for a while. Therefore, the industry is searching for growth power in petrochemistry and other new business sectors, rather than refining in order to stabilize the business structure.
The four refining companies are also working hard to increase production of benzene, toluene, and xylene (BTX) and PX used for making terephthalic acid (PTA) by 2015, which is by the time when China completes its mass production of high-purity PTA used for making synthetic fiber or polyethylene terephthalate (PET) bottles.
SK Innovation is continuing to strengthen its business abilities in the electron materials sector through secondary cell batteries for electronic vehicles, Flexible Copper Clad Laminate (FCCL) for circuit boards, Lithium-ion Battery Separators (LiBS), and Tri-acetyl Celluose (TAC.
GS Caltex is also advancing with non-refining business sectors such as functional plastic and pitch-based activated carbon fibers.