Hanshin Rating "Domestic Refiners' Credit Outlook Downgraded...Large Losses in Q1"

[Asia Economy Reporter Hyungsoo Park] Korea Ratings has downgraded the credit rating outlook for refining companies' corporate bonds.

On the 13th, Korea Ratings conducted a regular evaluation of corporate bond credit ratings and changed the outlook for unsecured bonds of SK Innovation, SK Energy, S-OIL, and SK Incheon Petrochem from 'Stable' to 'Negative.'

The outlook for Hyundai Oilbank was changed from 'Positive' to 'Stable,' while the credit rating outlook for GS Caltex was maintained.

Hong Seokjun, a researcher at Korea Ratings, explained, "In the first quarter of this year, a large-scale operating loss occurred due to a sharp decline in crude oil prices and refining margins," adding, "Considering international oil prices, refining margins, and the supply and demand situation of major products, we expect poor performance to continue for the time being."

In the first quarter of this year, the domestic refining industry recorded an operating loss of approximately 4.4 trillion KRW. SK Innovation posted a loss of 1.8 trillion KRW, and GS Caltex and S-OIL each recorded losses of around 1 trillion KRW. As international oil prices fell below $30 per barrel, the four companies collectively reflected about 3.1 trillion KRW in losses related to oil price fluctuations due to inventory time lag effects and year-end inventory asset valuation.

Next year, it is expected that positive time lag effects from additional oil price increases will be reflected, and that low oil prices and global economic recovery will contribute to the recovery of petroleum product demand, achieving operating profits at the level of last year.