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SK Lubricants reports higher operating profit, despite slump in oil demand in 2020

SK Innovation 2020 results
Image courtesy of SK Innovation

SK Lubricants reported an increase in operating profit for four consecutive quarters during the full year of 2020, despite a slump in global oil demand due to the Covid-19 pandemic that restricted personal mobility and global travel. Despite sluggish results for the global oil refining industry, the base oil manufacturer managed to post steady growth in operating profit through each quarter in 2020. In particular, operating profit in the last quarter was 4.3 times higher compared to the first quarter.

Sales did fall for South Korea’s largest oil refiner in the second quarter, following the declaration by the World Health Organization (WHO) that Covid-19 is a global pandemic. Sales quickly recovered in the third quarter, however. South Korea was one of a handful of countries that fared relatively well during the pandemic, with lower infected cases and lower death rates.

“This is the result of our accumulation of leading technology to respond to the high quality and diversification, along with the preference for eco-friendly products of the current global lubricant market,” SK Lubricants said in a statement.

SK Lubricants’ competitiveness lies in its Group III base oil, the company said. Launched in 1995, “YUBASE” has continuously expanded its market share. With a total global market share of 35%, SK Lubricant’s YUBASE is the unrivaled number one player in the Group III base oil segment, the company touted.

Base oils are categorized by the American Petroleum Institute (API) by Groups, from 1 to V, according to their properties. The requirements for higher fuel efficiency and lower tailpipe emissions have driven the demand for Group III. Group III has less sulfur so it emits less greenhouse gases. Original equipment manufacturers (OEMs) are also requiring lower viscosity engine oils to lower engine friction, which is another factory driving demand.

 With base oil production facilities in South Korea, Indonesia and Spain, SK Lubricants is supplying Group III products to major lubricant companies in more than 50 countries. One of the most recent big deals of the company is the contract to provide premium base oils to China’s largest oil and gas producer PetroChina in June 2019. 

Aiming to lead in EV lubricants 

SK Lubricants is also expanding its portfolio of eco-friendly products and lubricants for electric vehicles (EV). SK Lubricants continues to develop and produce highly functional eco-friendly lubricant products through its own lubricant brand, SK ZIC. In September 2020, the company launched ZIC ZERO, an eco-friendly lubricant product. In addition to better fuel efficiency and enhanced engine protection performance, the entire packaging container is made from recycled materials.

The global EV lubricant market is expected to grow at a rate of more than 24% per year by 2030, according to SK Lubricants, whose parent company SK Innovation is also a leading EV battery manufacturer.

The company also plans to target the lubricant market for renewable energy facilities by developing and supplying lubricant products necessary for onshore and offshore wind power generation facilities. 

“With the motto of ‘Beyond Lubricants, We accelerate sustainable future,’ we will grow into a global company focused on ESG management by expanding our portfolio for eco-friendly energy/mobility/the future,” said a representative of SK Lubricants.