S Korea's SK Global Chem to face weaker product margins - Moody's

17 July 2013 09:21  [Source: ICIS news]

SINGAPORE (ICIS)--South Korea’s SK Global Chemical (SKGC) is expected to face weakening product margins in the next two to three years amid increasing capacity in Asia for some of its products such as paraxylene (PX) and ethylene, ratings firm Moody's Investors Service said on Wednesday.

“Such a scenario is particularly relevant for the company's exports, as margins on commodity petrochemical products can weaken significantly,” it said in a statement.

“Softening spreads, particularly for its olefins and some aromatics, such  as PX/orthoxylene (OX), will remain the biggest challenge for SKGC” the firm said.

Olefins and PX/OX accounted for 29% of SK Global Chemical’s overall sales last year, according to Moody’s.

However, the company’s diverse product portfolio should reduce the negative impact from weakening margins in some products, said Mic Kang, a Moody's vice president and senior analyst.

Meanwhile, Moody’s has assigned a “Baa2” issuer rating to SKGC with a stable rating outlook.

"The rating reflects SKGC's stable market position in Korea, its vertically integrated operations with its parent SK Innovation, its adequate cushion against market volatility, and its large investments and capex [capital expenditure]," Kang added.

By: Nurluqman Suratman

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