South Korea's Crude Imports Begin to Fall

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Researched by Industrial Info Resources East Asia (Kofu-shi, Japan)--This past year, domestic demand for refined petroleum has dropped due to high costs, especially for gasoline. However, though South Korea's four refiners account for 90% of domestic petroleum supplies, they are profiting from increased regional demand. As of this year, refined products have become the country's largest export, surpassing electronics.

South Korea has been fighting an on-again-off-again battle with inflation in recent years. Inflation has stirred concerns over the widening gap between domestic and foreign demand, though growth is still taking place. Much of the country's economic growth took place during the first half of the year, driven by an increase in domestic production by the Great East Japan Earthquake Disaster as well as increased regional demand. Domestic fuel prices have been high as well and the country's refiners have already been penalized for collusion this year.

Sales between South Korea's refiners, which include SK Energy (SEO:096770) (Seoul), GS Caltex (Seoul), S-Oil Corporation (SEO:010950) (Seoul) and Hyundai Oilbank (Seoul), have increased due to a rise in exports. SK Energy has earmarked a $45 billion rise in sales just this year, representing a 28% increase year-over-year (y/y) for the first nine months. GS Caltex also saw a rise during the first nine months y/y, noting an increase of 38% y/y. S-Oil marked a 57% y/y rise for the first six months of 2011, while Hyundai Oilbank saw a 44% rise during the same time frame.

However, South Korea may already be feeling the drag of the poor global economic outlook. Crude imports have begun to fall, with November imports seeing an 11 million barrel drop from October. This drop in imports also represents nearly a 6% y/y decrease, though regional demand, especially from China, is expected to keep imports up through the end of the year.

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