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

July 09/2021

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.
Author:Margaret Volkova
Tags:PP, PE, crude and gaz condensate, propylene, ethylene, petrochemistry, Hyundai Petrochemical, South Korea.
Category:General News
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