After Hyundai Oilbank finishes construction of its HPC in 2021, Korean refiners’ naphtha consumption will increase, leading to a continued rise in imports. Korean refiners are also likely to use naphtha to produce chemicals, starting with Hyundai Oilbank in 2021 and followed by S-Oil. Since NCCs produce a variety of products in addition to ethylene downstream products, Korean NCCs are bound to feel an increasing oversupply burden. Since China imposed a 25% tariff on US-made HDPE and LLDPE in August, US exports bound for Southeast Asia have greatly increased. According to the ICIS, US exports of PE have recently increased to 370,000 tons per month, which is 4.4mn tons per year. The constructions of large-scale Asian refineries, which were planned for this year in Malaysia (RAPID) and Saudi Arabia (JiZan), have been delayed to 2020. From 2019 to 2021 an additional capacity of 810K bpd will come on line, which may look burdensome.



As such, regardless of the US-China trade disputes, we believe competition in the Asian PE market will intensify. In the US, (16.78mn, young Petite nude -1.6% YoY) demand is expected to shrink for two consecutive years, despite falling rates on installment payments, due to prolonged trade disputes and increased uncertainties ahead of the presidential election. This suggests that: 1) top-line growth should be limited, and that selective approach toward companies with good bottom line growth prospect is valid; 2) auto parts manufacturers with high exposure to China are unlikely to see earnings recover in 2020; and 3) due to tightening GHG emission regulations in Europe, the sales of xEVs, which is still unprofitable, will likely expand while the utilization rates of ICEVs fall, which means further margin squeeze. Since demand is expected to increase by 6mn tpa on annual average, ethylene will be in severe oversupply by 2020. ICIS predicts that global ethylene utilization rates will continue to decline until 2021 from the 2018 peak. If China lifts its tariffs on US HDPE and LLDPE, the prices of these products exported from the US to Asia will decline further. China's ethylene capacity was about 25.6mn tpa as of 2018, but the country’s ethylene self-sufficiency rate is expected to increase continuously with an addition of 5mn tpa capacity on annual average from 2019 to 2021. It's not just China.



As NCCs in China and Korea have begun to expand capacity since 2019, we expect naphtha oversupply to ease. Russia is also rushing to build large-scale NCCs. Thus, even if the US-China trade dispute is resolved, the impacts on Korean NCCs will be fairly limited. Thus, more than 5mn tons of naphtha imports are estimated to be for condensate splitter. In our view, Chinese teapot refineries are primary candidates. The falling bunker C oil margin can also drive utilizations lower, especially for those of teapot refineries. India; and 3)margin eroion in Europe amid a decrease in both supply and demand due to uncertainties at home and abroad as well as tightening regulations. In Europe, (16.98mn units, -3.3%), supply and demand are both likely to decrease because of trade disputes, Brexit, and strengthening CO2 regulations. Global auto demand is expected to grow only 0.3% YoY to 81.72mn units in 2020 due to lingering uncertainties after two consecutive years of declines.



2020 strategy: Korean auto names to become relatively more attractive vs. Live cams also serve as a more interactive form of porn, since you can tip the models to perform your fantasy for you (and anyone else that happens to be in the chat). Michelle, sex live web cams her legs. Live sex shows are open for all comers. The effects of US ECC capacity expansions are already materializing. The capacity expansion in 2019 is 760K tpa, and the annual increase in naphtha demand is 2.5mn tons. The capacity expansions of US shale-based crackers are being finalized, but from 2020, China's NCC expansion is expected to pick up pace. We continue to present S-Oil as our refining sector top pick. The implementation of the IMO 2020 regulation mandate will not only work to boost diesel margins but also trigger consolidations in the refinery sector. We expect refining margins to remain firm in 2H20. Gasoline-bunker C oil spread, a key barometer of RUC facilities’ profitability, has breached above USD25/bbl, raising expectations that S-Oil’s earnings will outperform.