South Korea’s refinery industry is projected to hemorrhage massive losses of over 5 trillion won ($4.5 billion) this year, but it may be nearing the end of a tunnel with the arrival of COVID-19 vaccines, industry sources and experts said Sunday.

As the demand for oil shows no sign of immediate recovery in the fourth quarter of this year, due to the prolonged coronavirus outbreak, four major Korean refineries -- SK Innovation, GS Caltex, S-Oil and Hyundai Oilbank -- are widely expected to log more losses in the final three months. That would add to the combined 4.8 trillion won in losses from the January-September period.

But as vaccinations begin in the US and UK, raising hopes for an economic recovery, analysts expected a turnaround later next year.

“As the operating rates of (petrochemical facilities) remain low and petroleum product inventories remain high, a meaningful improvement in refining margins is expected to materialize in the second half of next year when the COVID-19 outbreak will have passed,” Daishin Securities analyst Han Sang-won said.

Another official at Yuanta Securities echoed the view.

“The COVID-19 vaccines will lead to the recovery of gasoline and aviation fuel and bring the refining margins back to the break-even point starting the second half of next year.”

According to Korea National Oil Corp., the refining margins this month stood at $0.50, meaning that refiners can reap $0.50 when they process one barrel of crude oil and sell petroleum products. Typically, for refineries to stay profitable, refining margins must stay above $4.

By Kim Byung-wook (kbw@heraldcorp.com)