Although the U.S. and Iran have entered negotiations to end hostilities, the domestic industrial sector is expected to feel the impact starting in the second quarter. Industries are experiencing mixed fortunes, with some benefiting while others face challenges.
The blockade of the Strait of Hormuz has led to unprecedented logistics disruptions, benefiting the shipbuilding and refining sectors, while the aviation and battery industries are likely to see declines in performance.
◆ Shipbuilding and Refining Benefit from Crisis
According to industry reports, shipbuilding has shown the most significant growth due to the Middle East conflict. The blockade has caused a surge in demand for alternative vessels, leading to a substantial increase in high-value ship orders.
HD Hyundai's intermediate holding company, HD Korea Shipbuilding & Marine Engineering, reported a 57.8% increase in operating profit for the first quarter, reaching 1.356 trillion won, the highest quarterly profit since its establishment in 2019. Revenue also rose by 20.2% to 8.1409 trillion won, with net profit increasing by 86.6% to 1.1414 trillion won.
Hanwha Ocean also saw a 70.6% increase in operating profit to 441.1 billion won, driven by high-value orders for liquefied natural gas (LNG) carriers. Samsung Heavy Industries reported a 16% increase in revenue to 2.9023 trillion won and a 122% rise in operating profit to 273.1 billion won, attributed to increased construction of high-profit vessels amid rising maritime logistics risks.
The refining sector has also benefited from sustained high oil prices due to the conflict, improving refining margins as oil product prices rise. Analysts estimate that the combined operating profit of South Korea's four major refiners could reach around 4 trillion won in the first quarter.
The petrochemical industry has managed to defend its profits despite soaring raw material costs, leveraging existing low-cost materials to improve performance. LG Chem reported an operating profit of 164.8 billion won in its petrochemical division for the first quarter, while Hanwha Solutions' chemical sector turned a profit of 34.1 billion won, recovering from a loss of 91.2 billion won in the same period last year. Lotte Chemical is also expected to report a profit.
◆ Airlines and Battery Sector Face Challenges
Airlines are expected to shift from a brief profit period in the first quarter to significant losses starting in the second quarter. Jeju Air reported an operating profit of 49.7 billion won in the first quarter, but a loss is anticipated in the second quarter. T'way Air's operating loss is expected to widen from 7 billion won in the first quarter to 132 billion won in the second quarter.
Jin Air, which posted an operating profit of 42.7 billion won in the first quarter, is projected to incur a loss of 53 billion won in the second quarter. Air Busan is also expected to shift from a profit of 30.4 billion won in the first quarter to a loss of 8 billion won in the second quarter.
An airline official stated, "The war has caused international oil prices to soar, directly impacting the cost of aviation fuel, which is based on Dubai crude prices. Aviation fuel is difficult to store in large quantities due to its high risk of deterioration, and refiners are passing on cost increases from the blockade to aviation fuel margins, leading to ongoing losses for airlines since April."
The battery sector is also experiencing a downturn. Rising energy prices and prolonged high interest rates due to the conflict have dampened electric vehicle demand, resulting in losses for all three major battery companies. LG Energy Solution reported an operating loss of 207.8 billion won in the first quarter, while Samsung SDI recorded a loss of 155.6 billion won, and SK On is expected to face losses between 300 billion and 400 billion won.
* This article has been translated by AI.
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