Hyundai Oilbank plans IPO in 2022 in a move to take full advantage of domestic demand recovery and strong refining margins

MOSCOW (MRC) -- South Korean oil refiner Hyundai Oilbank plans to list its shares on the country's main bourse next year as the fuel producer aims to take full advantage of the country's upbeat oil demand recovery outlook and strong refining margins, while favorable capital market conditions amid low interest rates bode well for raising funds, reported S&P Global.

Hyundai Oilbank's board members have approved a plan to push for an initial public offering, or IPO, some time in 2022, a company official told S&P Global.

Hyundai Oilbank is owned 74.13% by Hyundai Heavy Industries Holdings that runs South Korea's top shipbuilder Hyundai Heavy Industries, while Saudi Aramco holds a 17% stake as the second-biggest shareholder.

Hyundai Heavy Industries Holdings said its board has also approved the refining subsidiary's IPO plan.

This is the second attempt to list Hyundai Oilbank on South Korea's stock exchange after the refiner aborted its first IPO bid in late 2018 in the wake of a deal by Hyundai Heavy Industries to sell a 17% stake in Hyundai Oilbank to Saudi Aramco in January 2019 for USD1.24 billion.

The refiner's IPO plan comes at a strategically appropriate time as South Korea's domestic consumer and industrial fuel demand is poised to stage a steady recovery from the lows seen in 2020 due to the outbreak of the coronavirus pandemic, industry and market participants said.

"South Korea is likely to be among the first batch of countries to emerge out of the pandemic thanks to the fast pace of the country's vaccination progress... subsequently, domestic oil products demand has started to pick up in recent months, improving the fuel sales outlook, which would be highly positive for investor sentiment," said a marketing source at Hyundai Oilbank.

Over January-April, South Korea's oil products consumption rose 1.4% year on year to 297.291 million barrels, latest data from state-run Korea National Oil Corp. showed.

Consumer demand for transportation fuels in particular will likely continue improving in line with increasing population mobility as the nationwide vaccination program gathers pace, refinery officials and market analysts said.

Hyundai Oilbank reported an operating income of Won 412.8 billion (USD369 million) in the first quarter, recovering from a Won 563.2 billion operating loss in the same period a year earlier and a Won 78.6 billion operating loss in Q4 2020. Its Q1 sales rose 2.7% year on year to W4.54 trillion.

The sharp uptrend in Asian middle distillate crack spreads would continue supporting the refiner's domestic product sales and export earnings, while jet fuel margins may eventually recover as international flights are bound to flourish when the pandemic ends, the company official and marketing source said.

Hyundai Oilbank's IPO bid was also largely driven by favorable capital market conditions as ample liquidity in the financial market amid record-low interest rates, on top of the country's rosy economic recovery outlook, will likely spur investor appetite, the company official and fixed income market analysts in Seoul said.

As MRC informed earlier, Hyundai Oilbank shut its one crude distillation (CDU) unit, a residual desulphurises and a fluid catalytic cracker (FCC) unit at its Daesan refinery for a maintenance turnaround on April 8, 2020. The refinery remained off-stream for around 30-45 days. Located at Daesan in South Korea, the refinery has a crude processing capacity of 395,000 bpd.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.
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1. US fossil fuel consumption down by 9% in 2020 - EIA

MOSCOW (MRC) -- In 2020, total consumption of fossil fuels in the United States, including petroleum, natural gas, and coal, fell to 72.9 quadrillion British thermal units (Btu), down 9% from 2019 and the lowest level since 1991, according to Hydrocarbonprocessing with reference to US Energy Information Administration's (EIA) Monthly Energy Review. Last year marked the largest annual decrease in US fossil fuel consumption in both absolute and percentage terms since at least 1949, the earliest year in our annual data series. Economic responses to the COVID-19 pandemic in 2020, including a 15% decrease in energy consumption in the US transportation sector, drove much of the decline. The United States also had relatively warmer weather in 2020, which reduced demand for heating fuels.

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MOSCOW (MRC) -- Crude oil futures extended overnight losses during mid-morning Asian trade July 8 as the release of bullish American Petroleum Institute data failed to lift market sentiment, amid fears of a breakdown in OPEC+ cooperation, while a stronger US dollar providing further headwinds for prices, reported S&P Global.

At 11:06 am Singapore time (0306 GMT), the ICE September Brent futures contract was down 20 cents/b (0.27%) from the previous close at USD73.23/b, while the NYMEX August light sweet crude contract was down 31 cents/b (0.43%) at USD71.94/b. The Brent and NYMEX light sweet crude markers had fallen 1.48% and 1.59% overnight to settle at USD73.43/b and USD72.20/b, respectively.

Market analysts attributed the downslide to concerns that the OPEC+ agreement could break down after the producer group cancelled its July 5 meeting before agreeing on an increase in production quotas August onward.

The fears were kindled by media report, which said that the UAE could raise output outside of the OPEC+ agreement, with analysts saying such a move could prompt other members to follow suit in the ensuing battle for market share. The UAE had earlier, during OPEC+ negotiations, objected to Saudi Arabia's plan to tie the production increases to a lengthening of the supply management pact through to the end of 2022, insisting that its baseline production level from which its quota is determined be raised first to reflect its current capacity.

Outside of the OPEC+ saga, oil prices were also weighed down by a stronger US dollar, with the US dollar index trading at 92.77 at 10:56 am, up 0.24% from the previous settle. Analysts said the appreciation of the dollar was driven by signs of strength in the US labor market following the release of the May Job Openings and Labor Turnover Survey, or JOLTS, report.

A stronger US dollar makes dollar denominated assets such as oil more expensive for buyers holding foreign currency, and hence dampens their demand.

OPEC+ concerns and the strength of the US dollar negated the impact of the bullish API data, released late July 7. The API data showed US crude inventories falling by 7.98 million barrels in the week ended July 2, and US gasoline inventories falling 2.74 million barrels. Distillate inventories registered a build, rising 1.09 million barrels.

We remind that as MRC informed earlier, Indian refiners, anticipating a lifting of US sanctions, plan to make space for the resumption of Iranian imports by reducing spot crude oil purchases in the second half of the year. The world"s third-largest oil consumer and importer halted imports from Tehran in 2019 after former US President Donald Trump withdrew from a 2015 accord and re-imposed sanctions on the OPEC producer over its disputed nuclear programme.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.
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MOSCOW (MRC) -- South Korea's GS Caltex restarted its new mixed-feed cracker at Yeosu on July 5, 2021, and resumed trial operations at the plant, reported S&P Global.

The company shut this cracker on June 27, 2021, owing to a technical issue. The company source said it will take some time for GS Caltex to produce on-spec ethylene and propylene.

The new steam cracker, which came online around June 18, has the capacity to produce 750,000 mt/year of ethylene and 430,000 mt of propylene. This schedule is earlier than the initial plan of 2022.

As MRC informed before, this June, the company also started up its new high density polyethylene (HDPE) in Yeosu with an annual capacity of 500,000 tons/year that would concentrate on producing the film (TR-144, TRB-115), blow molding (5520BN or BM593), and injection (6060 or 6060UV) grades.

The company also operates 180,000 tons/year polypropylene (PP) plant at the same complex.

The project is a 50-50 joint venture between GS Energy Corp. and Chevron Corp., costing 2 trillion won (USD1.84 billion) that started construction work in 2019.

Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 744,130 tonnes in the first four month of 2021, up by 4% year on year. Shipments of all PE grades increased. At the same time, PP deliveries to the Russian market were 523,900 tonnes in January-April 2021, up by 55% year on year. Supply of homopolymer PP and PP block copolymers increased, whereas shipments of PP random copolymers decreased.
MRC

MOSCOW (MRC) -- SIBUR, the largest petrochemical complex in Russia and Eastern Europe, has announced that it has successfully closed the order book on a BO-03 exchange-traded bond issue totalling Rb10 bln, said the company on its site.

The books closed at the lower end of the final guidance range, with the coupon set at 7.65% per annum and the issue enjoying best-in-class distribution at this coupon rate. The issue achieved the narrowest spread to OFZs (ruble-denominated Russian Treasury bonds) on the local bond market in the Company’s history.

The bonds have a par value of Rb1,000 each. The offering price was 100% of the par value. The bonds have a coupon period of 182 days and a tenor of 10 years, with an option to call the bonds or reset the interest rate after four years.

The placement drew strong investor interest, with more than 60 orders and total demand exceeding Rb55 bn. Leading Russian public and private banks, non-government pension funds, investment and asset managers, insurance companies, brokers and retail investors took part in the placement.

Member of the Management Board and Managing Director for Economics and Finance at SIBUR Peter O'Brien commented on the event: “This bond issue is a logical next step in our team’s ongoing work to manage liquidity and optimise the Company’s debt portfolio in line with the current expectations of SIBUR’s projected cash flows. Thanks to the attractive levels of liquidity present on the Moscow Exchange and the speed with which we are able to issue a new instrument in accordance with our established bond documentation, in one day we collected an order book that was more than five times oversubscribed with demand at the tightest spread to OFZs in the Company’s history. This transaction further evidences the level of interest and confidence in SIBUR’s credit profile amongst a wide range of investors including pension funds, financial institutions and individuals.”

The placement was led by Gazprombank, Sberbank CIB and UniCreditBank. Gazprombank also acted as the placement agent. The bonds will begin trading on Moscow Exchange on 13 July 2021 and included in MOEX’s Level 2 Quotation List.

As reported earlier, in May 2020, SIBUR Holding closed the order book for the placement of exchange-traded bonds of two series in the volume of Rb10 and 5 billion, respectively. Based on the results of the book formation, the semi-annual coupon rate was set at 5.50% per annum, which is the lowest coupon among the market issues of corporate issuers in the entire history of the modern Russian public debt market. The nominal value of one bond is Rb1,000. The placement price is 100% of the face value. The maturity date is 10 years from the date of commencement of the placement. The coupon period is 182 days. The term until the offer is 2.5 years.

As MRC informed previously, SIBUR is ready to quickly conduct an initial public offering (IPO) upon receipt of an appropriate decision of shareholders, the company is structurally ready for placement, the head of the company Dmitry Konov said to reporters in sidelines of the international industrial exhibition "Innoprom". At the same time, in case of an IPO, SIBUR may place its shares on the Moscow Exchange, D. Konov added.

It was also reported that in June,, 2021, the international rating agency S&P Global Ratings confirmed the long-term issuer default rating of the Russian petrochemical company SIBUR at "BBB-" with a "stable" outlook.

SIBUR manufactures and sells petrochemical products on the Russian and international markets in two business segments: olefins and polyolefins (polypropylene, polyethylene, BOPP, etc.), as well as plastics, elastomers and intermediate products (synthetic rubbers, expanded polystyrene, PET, etc.)
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