Korea imported a total of

Korea imported a total of 2.8 million BPDs of oil in 2021. Of this, 150,000 BPDs are imported from Russia, the Far East. Therefore, about 5.4% of the total imports were imported from Russia, the Far East.

The price of Russian crude oil is good, even though you might think it's a small quantity. Therefore, since 2019, Korea has been increasing the volume of imports. Our oil refiners have the know-how in handling crude oil from all over the place.

So Russian crude oil has contributed to some of the profitability improvement of refiners since 2021. In the meantime, Russia has invaded Ukraine. Korea has also stopped importing Russian oil. On the contrary, China has increased Russian oil imports since the 'Russian-U.S. war'.

When the profitability of Korean oil refining/petrochemical companies reaches its worst, Taiwanese and then Chinese companies usually lower or turn off facility utilization rates. In other words, Taiwanese and Chinese companies turn off their facilities before us.

So, it was a common pattern to start a slight rebound when the deterioration of business conditions lasted for more than 5-6 months and Korean companies considered adjusting the utilization rate. However, this was not seen at all in this down cycle.

100%, or 99%, is because China bought Russian oil at a ridiculous price. The spread could not be sustained even considering the oversupply/self-sufficiency rate improvement from China. What does the high self-sufficiency rate have to do with profitability when Chinese oil refining/petrochemical companies cannot make it cheaper than Korea? Rather, the size of the deficit caused by the adjustment of the utilization rate may be larger, so companies that have expanded due to excessive investment may be more vulnerable to worsening business conditions.

It is a pity that the Russia-U.S. war ends in forced Ukrainian concessions and irreparable damage. But if it does end, I think it will be the Chinese oil and petrochemical companies that will suffer the most.

Conversely, in Korea, the industry that faces the greatest opportunity for recovery is the oil refining/petrochemical industry. The cost of raw materials for Chinese competitors remains to rise, and that of Korean companies remains to fall.

Chinese companies are already adjusting their utilization rates. It is impossible to predict when the Russo-Western War will end, but if a ceasefire or the end of the war becomes a reality, people's views on Korea's oil refining/petrochemical industry will also change significantly.