'Solid Performance Amidst Recession' - S-Oil · GS Caltex, What’s Their Secret?

[Korea Financial Times, Gwak Horyung] Despite the economic downturn last year, GS Caltex and S-OIL managed to differentiate themselves by leveraging their lubricant and petrochemical divisions, respectively.

The combined annual operating profit of South Korea’s four major refiners stood at approximately KRW 1.58 trillion in 2024, a sharp decline to nearly one-third of the KRW 4.47 trillion recorded in 2023.

Looking back over the past year, all four companies were in the red in the wake of the economic slowdown that began in earnest in the second quarter and the plunge in oil prices in the third quarter, before rebounding in the fourth quarter on the back of a recovery driven by winter heating demand.

GS Caltex recorded the highest operating profit among its peers, posting KRW 548 billion. The company’s lubricant business has consistently delivered strong margins, standing out from competitors. While rivals in the sector maintain an average operating margin of around 15%, GS Caltex surpassed 25%. This success is attributed to the company’s strategic focus on high-value automotive lubricant finished products.

S-OIL recorded the highest operating margin (1.3%) among the four major refiners. Although it was the only company in the sector to post a deficit in its refining operations, its relatively strong performance in the struggling petrochemical sector helped offset losses. It was the only one of the four to post a loss in its refining business, but it offset this with relatively solid profitability in petrochemicals, where all were struggling.

S-Oil plans to start the Shahine Project in Ulsan in 2026, investing KRW 9 trillion to build a large-scale petrochemical complex. It is expected that the project will disrupt the domestic petrochemical landscape, leveraging the raw material prices and technological competitiveness of its parent company, Saudi Aramco. S-OIL plans to nearly double the proportion of its revenue derived from petrochemicals, increasing it from the current 12-13%.


HD Hyundai Oilbank struggled due to setbacks in its petrochemical business. Its joint venture with Lotte Chemical, HD Hyundai Chemical, posted an operating loss of KRW 70 billion.
Meanwhile, SK Innovation delivered relatively stable results in its traditional oil-based businesses. However, it suffered a substantial KRW 1.4 trillion deficit in its battery and battery materials divisions. The company did alleviate some financial pressure through its Q4 merger with E&S.

The industry outlook for this year is expected to be similar to last year. Global economic sluggishness and stable international oil prices are anticipated to continue.

There is, however, a variable: former U.S. President Donald Trump. The domestic industry holds mixed feelings of “half expectation, half concern.”

If the Trump administration enforces a policy of strengthening tariffs, it could have a positive impact on the domestic refining industry. The increase in the proportion of expensive U.S. refineries could raise margins for oil products overall. However, uncertainty surrounding implementation and potential side effect of a global trade reduction make it difficult to gauge the actual impact on the industry.
Gwak Horyung (horr@fntimes.com)