JAKARTA (TheInsiderStories) – Moody’s Investors Service says that the aggregate EBITDA of Asian refiners will decline by around 30 percent, which could go as high as 45 percent, excluding Japanese refiner ENEOS Holdings, Inc., (Baa2 stable). The agency also rated that margins will stay weak in 2020.
“EBITDA and margin will improve in 2021 as a gradual economic recovery results in higher refining margins and the absence of inventory losses leads to higher earnings. But risks to margin recovery are firmly tilted to the downside,” says Hui Ting Sim, a Moody’s analyst in a latest report.
He adds, “Margin recovery will be delayed if a resurgence in infections leads to renewed lockdowns. We’re also seeing higher market imbalance, with a surge in refining capacity continuing through 2022 driven by investments in Asia and the Middle East, which will further weigh on the extent of margin recovery.”
Among rated Asian refiners, some are better positioned than others to withstand weaker-than-expected refining margins. Moody’s expects ENEOS will be best positioned to maintain its credit quality, whereas HPCL-Mittal Energy Ltd., (HMEL, Ba2 negative), Thai Oil Public Co. Ltd., (Baa2 negative) and SK Innovation Co. Ltd. (SKI, Baa2 negative) have lower buffers.
Most rated Asian refiners have close links with their respective government or have strong shareholders, hence their refinancing risk is low. Moody’s expects them to maintain strong access to funding given their good relationships with banks or track record of access to capital markets.
Earlier, S&P Global reported, many of refineries in the Asia-Pacific region have been ramping up runs, some, especially in Indonesian and India, are now reducing throughput on reimposed lockdowns, said S&P Global in the latest report.
The agency hopes that India’ oil demand will recover in the second half of the year are fading fast as some provinces implement partial lockdowns to battle the COVID-19, prompting refiners to start planning for lower crude runs in order to prevent a problem of plenty at home.
“India, one of the fasting growing oil markets in Asia in recent years, is expected to end 2020 with its oil demand slipping into the red, a trend not seen for nearly two decades, as per government officials and oil analysts. The last time India witnessed negative growth in oil demand was in 2001 when consumption fell marginally from 2000 levels,” said S&P Global.
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