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Widening PX spreads bode well for local refiners

All Headlines 09:42 March 08, 2016

SEOUL, March 8 (Yonhap) -- Widening paraxylene (PX) spreads stemming from firm demand and reduced supply are expected to help South Korean oil refineries rack up decent earnings this year following last year's stellar performance, industry sources said Tuesday.

According to the sources, PX spreads stood at US$414 per ton last month, hovering above the $400 level for the first time in 18 months.

PX spreads dipped to below $300 per ton in 2014 due to supply increase amid sluggish demand, after staying between $500 and $700 per ton in the early 2010s. The break-even point for local refiners is estimated at some $250 per ton.

Paraxylene, derived from crude oil, is used as a raw material in producing polyester.

The recent surge in PX spreads is caused by some foreign rivals suspending their production facilities due to technical glitches.

No. 1 oil refiner SK Innovation Co. and its affiliates have a total PX capacity of over 3 million tons, followed by S-Oil Corp. with 1.8 million tons, Hanhwa Total Co. with 1.77 million tons, GS-Caltex Corp. with 1.35 million tons and Hyundai Oilbank Co. with 1.18 million tons, sources said.

Last year, despite global oil prices hitting a multi-year low due to a supply glut, local oil refiners pocketed decent earnings on the back of improved cracking margins.

The country's four major oil refiners -- SK Innovation, GS Caltex, S-Oil and Hyundai Oilbank -- logged a combined operating income of 4.79 trillion won ($3.99 billion) last year, which presents a four-year high and marks a sharp turnaround from the previous year's almost 1 trillion won operating loss.

sam@yna.co.kr
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