South Korean refiner Hyundai Shell Base Oil (HSB) saw strong profit margin for its base oils and lube unit in the third quarter of the year, supported by firm Group II base oils prices and lower feedstock costs.

HSB’s operating profit margin reached 19.7% in the three months to end-September, slightly down from 21.2% during the previous three months.

The profit margin was still well above 15.5% during the same period last year and the second-highest in four years.

Sales vs profit

HSB’s profit margin rose even as sales fell by 6% in the third quarter from year-earlier levels.

Lower sales coincided with a drop in Asia’s Group II base oils prices in the third quarter versus year-earlier levels.

HSB’s operating profit by contrast rose by 20% during the same period.

Higher profit coincided with an even steeper fall in crude oil prices from year-earlier levels.

HSB’s share of Hyundai Oilbank’s total revenue held steady at around 4% in the third quarter of the year.

Its profit accounted for 26% of Hyundai Oilbank’s total profit.  

Fundamentals soften

HSB’s strong margins followed a similar pattern among rival South Korean refiners S-Oil and SK Enmove.

The dynamic reflected tighter supply-demand fundamentals in Asia in the first half of 2025.

Those fundamentals are now starting to soften.