Lubricant Boom Drives Refiner Profits, Petrochems Face Third Quarter Headwinds

South Korean refiners have seen a significant increase in profits due to higher prices and tighter supply of lubricating base oil. The four major refiners - SK Innovation, GS Caltex, S-Oil, and HD Hyundai Oilbank - recorded an operating profit of 882.71 billion won in the second quarter, a 48% improvement from the previous quarter's 596.35 billion won.

The strong performance was driven by the lubricating base oil business, with SK enmove, SK Innovation's lubricants subsidiary, posting an operating profit of 69.19 billion won, a 414.4% increase from last year. The other major refiners also saw significant increases in their lubricating base oil divisions.

However, petrochemical companies are expected to face challenges in the third quarter due to falling ethylene prices and an influx of naphtha from China. Kumho Petrochemical's success in improving profitability by producing synthetic rubber, a high-value finished product, is seen as a model for the industry to shift towards higher-value-added products.