Constant rising of the oil price will generate a huge amount of inventory profit for SK Innovation, says Hwang Yu-sik, analyst, NH Investment & Securities in its report on July 13.

“The company’s operating profit for Q2 this year will be about 574 billion KRW, a turnaround year-over-year,” added Yu-sik.

Analyst Hwang particularly pointed out that the oil price rise made profit from their inventory, letting them to make profits continuously in oil refinery industry and stressed that the price of Dubai Crude has risen dramatically, powered by the decision of OPEC+ countries to cut oil production continuously and the expectation of increased demand for refined oil products for the last half of this year.

He added “the average oil price for Dubai Crude for Q2 2021 is US $66, an increase of US $7.1 from US $58.9 in Q1 2021 and it will result in a huge amount of inventory profit.”

Hwang said, “As the price spread for Aromatics expanded, their business profit in chemical industry is expected around 161.4 billion KRW, increased by 43 billion KRW from the previous quarter,” explaining that the average price spread per ton of p-xylene (PX) in Q2 is US $234, 26% higher than Q1’s US $186, while that of benzene jumped 86% from US $190 in Q1 to US $353 in Q2."

In the same report, he said that SK Innovation announced their strategy to grow the EV battery in Story Day, adding that they are planning to invest in the EV battery as much as about total 18 trillion KRW in 5 years, expanding their production capacity to 200 GWh until 2025 and they also expanded their order backlog as much as 1 TWh, 65% higher comparing with the beginning of this year.

He also said, “Within this year, SK Innovation will regularize use of high-Nickel, in which the content of nickel is 90%, and the content of nickel they use for production will increase to reach 94% in 2025."

SK Innovation is completely changing the identity of the company “from carbon to green”-based business.’

The essence of the Financial Story, according to the explanation of CEO Kim Jun and other high level leaders of SK Innovation, is that they will simply change the identity of the company from that of carbon-based industry to that of green (eco-friendly) businesses. In doing so, they simplified their strategy into three major categories: Green Anchoring – building up a green portfolio with their battery industry and other businesses such as separation membrane and recycling of used batteries; Green Transformation – converting current projects to eco-friendly business models, such as plastic recycling, etc.; and Faster fulfillment of Net Zero, which means no more emission of greenhouse gases.