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Workers in the oil refining industry, known as ‘oil houses’, received wages of around 100 million earned during the first half of this year alone. S-Oil had the highest salary, which was 177 million won. GS Caltex (85.7 million), SK Energy (85 million won) and Hyundai Oilbank (54 million won) also reached 50 million to 85.7 million. According to simple calculations, the annual salary is in the range of 100 million to 200 million won.
Thanks to the record-breaking performance in the first half of this year, the salary was also high. However, the trend changed in the second half. There was a ‘dark cloud’ in the earnings outlook, as the refined margin, an indicator of earnings, went into negative territory for the first time in two years. Hyundai Oilbank also stopped investing in core refining facilities.
According to the Financial Supervisory Service on the 27th, Hyundai Oilbank announced on the 26th that it has suspended investment in a crude oil refining facility (PDU) and lower pressure distiller (VDU) facilities, which it was promoting at the Daesan plant in Seosan, South . Chungcheong Province, at a cost of 360 billion won. UDP / VDU is a core facility that boils crude oil and produces refined oil such as gasoline, diesel and heavy diesel.
The company decided to invest in facilities in 2019. However, as Corona 19 hit in 2020, the investment was postponed and the plan withdrawn this time. An official from Hyundai Oilbank explained, “As the prices of raw materials and labor costs increased, an environment was created that made it difficult to continue construction.
The lackluster performance was also the backdrop for the decline in investment. The oil refining industry, which achieved the greatest performance ever during the first half of this year, is slowly entering the tunnel from the second half of this year. The refining margin (the price of petroleum products minus the price of crude oil), a key indicator that determines refiners’ performance, also entered negative territory. Singapore’s composite refining margin in the third week of September was $0, down $2.7 from the previous week. On the 15th, it recorded -1.64 dollars per barrel, entering negative territory for the first time in two years since September 2020.
The interest rates and exchange rate prices around the oil refinery business environment are rising side by side.
The day before, the AA-rated corporate bond yield (based on 3-year unsecured bonds), which is the funding rate for high-quality companies, increased by 0.339 percentage points to 5.528% per annum. Not only is this the highest point this year, but it is more than three times higher than last year’s lowest level (August 19, 2021, 1.790% p.a.). The AA rate was trading at 5.447% pa, down 0.081 percentage points in the morning, but still hovering above the 5% level. Analysts say the rise in funding costs is reducing the incentives for companies to invest.
The dollar-earning exchange rate is also moving high. The previous day, the exchange rate closed at 1431 won 30, up 22 won. The day closed 9 gain 80 down, 1421 gain 50, but it is still higher than 1,400 gained. When the exchange rate rises, the cost of importing raw materials converted into KRW rises. As a refinery that imports crude oil, it is expected to take a direct hit.
By Kim Ik-hwan, staff reporter lovepen@hankyung.com
