Refining margins will remain weak during the current quarter amid a continuing demand slump and oversupplied markets, SK said, calling current business conditions "the worst management environment since the company started its refinery business in 1962". The bleak outlook follows a January-March quarter in which refining margins on gasoline and diesel turned negative and SK swung to a record operating loss of 1.78 trillion won ($1.45bn) from a year earlier profit of W328.1bn.
A plunge in crude prices also resulted in W941.8bn in inventory losses. Oil and products demand are so weak that SK has filled all of its storage, with it forced to pay tanker operators to wait offshore to unload contracted crude cargoes because its 840,000 b/d Ulsan refinery is unable to take delivery.
The Ulsan complex operated at an average 92pc of capacity in the first quarter, with the utilisation rate likely to be lower during April-June. SK has operated the plant at 85pc since March and has said crude runs may drop to 60-70pc in June and July.
SK also expects petrochemical profit margins to slump in the current quarter, even as supplies are reduced by turnaround projects, because Covid-19 will drive products demand lower. First-quarter C2 and paraxylene spreads each fell by more than half from a year earlier to $282/t and $267/t respectively.
SK's petrochemical business swung to a W89.8bn first-quarter operating loss from a profit of W320.3bn a year earlier. The result marked the company's first quarterly loss in the segment since 2015. SK blamed the setback on a drop in naphtha prices, which led to inventory losses.
January-March profit from the company's upstream business fell by 18pc to W45.3bn. Production slid by 17pc to 48,000 b/d of oil equivalent.
