S.Korean LPG importers' profits surge on replacement demand

South Korea’s liquefied petroleum gas (LPG) importers such as E1 Corp. and SK Gas Ltd. saw their operating profit skyrocket in 2022, as a surge in liquefied natural gas (LNG) prices fueled demand for the cheaper alternative. 

Operating profit at E1 shot up 5,000% on-year to 278.7 billion won ($220 million) last year on a consolidated basis, according to its regulatory filing on Feb. 10.

Sales were up 55.1% on-year to 8 trillion won. 

SK saw its 2022 operating profit jump 270% to 390.5 billion won, with sales up 24.2% to 8.1 trillion won.
 
According to the Korea National Oil Corp. (KNOC), LPG consumption in South Korea soared to a record 133 million barrels last year. It was the largest amount since the KNOC started compiling the relevant data in 1997.

LNG prices leapt 411% in 2022, due to lower supply since Russia’s invasion of Ukraine last year.

The sharp price increase drove petrochemical companies to turn to LPG instead of naphtha, in efforts to reduce costs and diversify feedstock.

LPG prices remained stable relative to naphtha, which tracks crude oil prices.

Last year, domestic petrochemical companies bought a total of 67.7 million barrels of  LPG, more than three times their purchase of 21.7 million barrels a decade ago. 

They accounted for 51% of South Korea’s LPG consumption, after exceeding 50% in 2020 for the first time in their history. 

E1's results were attributed in part to profits from overseas trading and strong earnings at LS Networks Corp., a trading company, as well as a low base effect. E1 owns 82% of LS Networks. 

Write to Seo-Woo Chang at suwu@hankyung.com

Yeonhee Kim edited this article.