Asia’s refining profits slump as Mideast exports surge

Singapore refinery margins have collapsed following a rise in fuel exports and a jump in oil prices. Tighter margins and rising labor costs mean many Asian refineries struggle to make a profit. (Shutterstock)
Updated 23 February 2019

Asia’s refining profits slump as Mideast exports surge

  • Since 2006, the Asia-Pacific has been the world’s biggest oil-consuming region, led by industrial users South Korea and Japan along with rising powerhouses China and India
  • However, overbuilding of refineries and sluggish demand growth have caused a jump in fuel exports from these demand hubs

SINGAPORE: Asia’s biggest oil consumers are flooding the region with fuel as refining output is exceeding consumption amid a slowdown in demand growth, pressuring industry profits.
Since 2006, the Asia-Pacific has been the world’s biggest oil-consuming region, led by industrial users South Korea and Japan along with rising powerhouses China and India.
Yet overbuilding of refineries and sluggish demand growth have caused a jump in fuel exports from these demand hubs.
Compounding the supply overhang, fuel exports from the Middle East, which BP data shows added more than 1 million barrels per day (bpd) of refining capacity from 2013 to 2017, have doubled since 2014 to around 55 million tons, according to Refinitiv.
Car sales in China, the world’s second-biggest oil user, fell for the first time on record last year, and early 2019 sales also remain weak, suggesting a slowdown in gasoline demand.
For diesel, China National Petroleum Corp. in January said that it expected demand to fall by 1.1 percent in 2019. That would be China’s first annual demand decline for a major fuel since its industrial ascent started in 1990.
The surge in fuel exports combined with a 25 percent jump in crude oil prices so far this year has collapsed Singapore refinery margins, the Asian benchmark, from more than $11 per barrel in mid-2017 to just over $2.
Combine the slumping margins with labor costs and taxes and many Asian refineries now struggle to make money.
The squeezed margins have pummelled the stocks of most major Asian petroleum companies, such as Japan’s refiners JXTG Holdings Inc. or Idemitsu Kosan, South Korea’s top oil processor SK Innovation, Asia’s top oil refiner China Petroleum & Chemical Corp. and Indian Oil Corp., with some companies dropping by about 40 percent over the past year. Jeff Brown, president of energy consultancy FGE, said the surge in exports and resulting oversupply were a “big problem” for the industry.
“The pressure on refinery margins is a case of death by a thousand cuts ... Refinery upgrades throughout the region are bumping up against softening demand growth,” he said.
The profit slump follows a surge in fuel exports from China, India, Japan, South Korea and Taiwan. Refinitiv shipping data shows fuel exports from those countries have risen threefold since 2014, to a record of around 15 million tons in January.
The biggest jump in exports has come from China, where refiners are selling off record amounts of excess fuel into Asia.
“There is a risk for Asian market turmoil if (China’s fuel) export capacity remains at the current level or grows further,” said Noriaki Sakai, chief executive officer at Idemitsu Kosan during a news conference last week.
But Japanese and South Korean fuel exports have also risen as demand at home falls amid mature industry and a shrinking population. Japan’s 2019 oil demand will drop by 0.1 percent from 2018, while South Korea’s will remain flat, according to forecasts from Energy Aspects.
In Japan, oil imports have been falling steadily for years, yet its refiners produce more fuel than its industry can absorb. The situation is similar in South Korea, the world’s fifth-biggest refiner by capacity, according to data from BP.
Cho Sang-bum, an official at the Korea Petroleum Association, which represents South Korean refiners, said the surging exports had “triggered a gasoline glut.”
That glut caused negative gasoline margins in January.


Samsung launches new flagship Galaxy S smartphone early, targets remote workers, gamers

This photo provided by Samsung shows the Galaxy S21. (Samsung via AP)
Updated 15 January 2021

Samsung launches new flagship Galaxy S smartphone early, targets remote workers, gamers

  • Samsung is set to release the S21 series at a cheaper rates
  • The series will be widely available starting Jan. 29 through Samsung.com, carriers and retailers online

SEOUL, South Korea: Samsung Electronics Co. Ltd. on Thursday unveiled the first Galaxy S smartphone with a stylus for on-screen work called the S Pen, more than a month ahead of its usual annual release schedule for models of its flagship compact phone.
Analysts have said offering a stylus within the Galaxy S21 series might signal the South Korean tech giant will merge the S line with its other premium smartphone range, the Note, already equipped with a note-taking stylus. That could free up resources for Samsung to push its separate range high-end foldable phones as key mass products rather than niche devices.
Samsung is also looking to grab market share after China’s Huawei Technologies was hit with US sanctions that restricted its supply and hurt sales, analysts have said.
An early Galaxy S21 launch is a likely tactic to capitalize on Huawei’s woes, said Counterpoint Research analyst Sujeong Lim. New iterations of the Note typically come in the second half of the year.
Lim said Samsung faces intense competition in the high-end category from Chinese vendors amid growing demand for devices that can be used for remote work amid the coronavirus pandemic, as well as play like videogaming.
In the United States, the Galaxy S21 price range starts at $799.99, the S21 Plus version at $999.99, and the S21 Ultra at $1,199.99.
The series will be widely available starting Jan. 29 through Samsung.com, carriers and retailers online, Samsung said.
With the most advanced processing chip in any Galaxy device, the S21 is 5G compatible and designed for shooting and viewing video and images as well as on-screen work. The top end of the range, the Ultra — the only version compliant with the S Pen stylus, which has to be bought separately — sports a four-lens rear camera that allows different angles and zoom shots.
Samsung plans to offer the stylus with other devices, said TM Roh, head of Samsung’s mobile communications business.
The standard S21’s screen size is 6.2 inches, with the S21 Plus at 6.7 inches and S21 Ultra is 6.8 inches, optimal for watching videos and gaming. The latter two are close in size to last year’s Galaxy Note ‘phablets’ — a cross between a phone and a tablet.
The S21 series is powered by Qualcomm Inc’s Snapdragon 888 chips or Samsung’s own Exynos 2100 chips depending on the region, Samsung said. Qualcomm said last month the 5G chips will be manufactured by Samsung’s chipmaking division.