Stable outlook for refining industry

 In a statement, it said that the refining industry in Asia Pacific has reached a peak in its business cycle. An expected increase in refining capacity worldwide and lower demand for refining products due to a global slowdown in economic growth will lead to an oversupply that could weigh on refining margins and capacity utilisation as soon as 2012 unless sufficient demand or rationalisation of capacity materialises.
Overcapacity will constrain Asian refining margins over the next 12-18 months, but any decline in margins will not approach the extent that occurred during the global financial crisis in 2008-2009.

"Generally, in terms of challenges, except for one-off events, refining margins have limited upside potential as the structural overhang in refining capacity will persist. Nevertheless, continued demand from China and India, which is expected to exceed the global growth trend, will benefit regional refineries serving intra-Asia markets," says Simon Wong, a Moody's Vice President and Senior Analyst.
 It noted that structural overhang in refining capacity will persist. However, continued demand growth in China and India will exceed the global trend, and this demand will benefit regional players serving intra-Asia markets. In the near term, import demand from Japan’s reconstruction after its earthquake and scaling back of nuclear-power generation will mitigate the risk of new Chinese and Indian capacity’s cutting into exports from Korea.