이 기사는 2022년 03월 14일 06:41 thebell 에 표출된 기사입니다.

Sanctions on Russia’s oil are likely to deal a major blow to South Korean petrochemical companies, disrupting the supply chain of crude oil and putting greater pressure on their profits amid surging prices for oil and gas.

South Korea imports crude oil, naphtha and other feedstock used in the refinery and petrochemical industries from Russia. Russian crude oil comprises 6% but its naphtha exports represent 23% of total supply to South Korea, according to Petronet, operated by the Korea National Oil Corporation.

South Korean companies operating naphtha crackers include LG Chem, SK geo centric, Hanwha Total Petrochemical, Lotte Chemical and Yeochun NCC.

Hanwha Total has the highest reliance on Russia among them, with more than half of its naphtha imports coming from the country. LG Chem and SK geo centric buy 10%-30% of their naphtha from Russia, while Lotte Chemical and Yeochun NCC have no supply exposure to Russia.

Those buying petrochemical feedstock from Russia are trying to replace it from elsewhere. Supply chaos is unlikely for now as they have naphtha stocks to cover the production until April.

The bigger problem, however, is surging prices for oil and gas products, accelerated by supply chain disruptions after sanctions on Russia.

According to data from the South Korean trade ministry, naphtha prices reached $1,023 per ton on March 4, up 27% from a week ago and 70.6% from the month before. The price of liquefied petroleum gas, which is used as a substitute of naphtha, is also rising, giving petrochemical firms little room to respond.

Moreover, feedstock prices have been increasing much faster than prices for products like ethylene, which is one of the major petrochemical products produced from naphtha. Ethylene prices rose about 19% over the past month, compared to an over 70% increase in naphtha prices.

This will put increasing pressure on profitability. Costs for raw material feedstocks represent 30%-85% of revenues generated by South Korean petrochemical companies.

Some are concerned that this could lead to lower capacity utilization. “If profitability continues to deteriorate, that could force us to reduce capacity utilization in the worst-case scenario,” said an official at one South Korean petrochemical firm. “We have to wait and see how things unfold.”

Meanwhile, the South Korean refinery industry has relatively low exposure to Russian oil. But higher oil prices, which are well above $100 per barrel, are eroding profits of refiners. Refinery margins dropped 17.4% week-on-week to $5.7 per barrel in the first week of this month.

“We are evaluating scenarios to respond to volatile oil prices,” an official at one South Korean refinery firm said. “If this situation continues, we may have to run production facilities in a more conservative manner.” (Reporting by Wie-su Kim)