Subdued conditions continue to reign in the Asia base oils market, with demand showing little improvement over the last couple of weeks and supply considered more than adequate for current requirements.
Prices have been under downward pressure and several grades succumbed, including API Group I bright stock, which had actually been stable-to-firm from the beginning of the year through the end of August. Bright stock suffered moderate downward adjustments of around $5 per metric ton in Asia this month, and heftier drops in India, but prices seem to have stabilized for the time being and no further revisions were reported.
Other Group I cuts had come under pressure as well because of the availability of competitively-priced Group II cuts, which can be used in a majority of Group I applications. Group II prices have suffered the consequences of oversupply since the start-up of the Chevron plant in Pascagoula, Miss., U.S., in July, and of the Hyundai Oilbank-Shell plant in Daesan, South Korea, in late July/early August (see related story in this issue).
While the Chevron plant does not export directly to many Asian countries, it was heard that some cargoes may be going in an indirect way to India, displacing volumes that were typically sold there by Northeast Asian suppliers. Other U.S. Group II producers, who had typically sold into the domestic market, have also increased exports to countries such as India, sources added.
The Hyundai Oilbank-Shell plant appears to have had more of an impact on the Chinese market, as several cargoes have been shipped into China since the plant started operations in late July/early August. At that time, domestic prices slumped and competition among suppliers is now ongoing.
The China market remains a key target for many Asian producers, but demand is currently described as sluggish, with buying interest for imports said to have dwindled.
Most requirements are being covered through local production, which is expected to increase in coming weeks as a number of plants return to production, following routine turnarounds.
Panjin Northern Asphalt was anticipated to restart its 400,000-metric tons per year Group II plant in Panjin in late September after an extended turnaround that began in June. The base oil plant started operations in November 2013.
Qisheng Industry planned to shut its 70,000 t/y Group I base oils unit in Shandong in late September, but is expected to restart it next month, according to sources. The supplier resumed production at its 70,000 t/y Group II unit at the same location in late August, following a maintenance shutdown that had started in June.
At the same time, some Chinese refiners plan to idle operations ahead of the typical slowdown at the end of the year, which should help the supply and demand balance.
Sinopec Jingmen has scheduled a two-month turnaround at its 200,000 t/y Group I and 100,000 t/y Group II plant in Hubei province, starting in November.
There is also concern that the start-up of the new SK Lubricants-Repsol Petroleum Group II/III plant in Cartagena, Spain, this month could have an impact on the Asian Group III segment, as some cargoes will likely move into this region given that they are not expected to be immediately absorbed by the European market.
Furthermore, the new plants Group III base oil supply will replace the imported volumes SK Lubricants was shipping to Europe from South Korea and Indonesia, which means these cargoes will have to find new homes in Asia, the U.S. and other countries.
The SK-Repsol plant can produce a total of approximately 650,000 t/y of 3, 4, 6 and 8 centiStoke grades, of which around 200,000 t/y will be Group II heavy base oil and around 450,000 t/y of Group III base oils.
In terms of pricing, there have been few changes noted in Asia this week as trading was thin.
On an ex-tank Singapore basis, Group I solvent neutral 150 prices were unchanged at $1,070-$1,120/t and SN500 at $1,060-$1,120/t. Bright stock was assessed at $1,215-$1,265/t.
On an FOB Asia basis, Group I SN150 was steady at $980-$1,010/t FOB, while SN500 was heard at $990-$1,020/t FOB. Bright stock prices were hovering at $1,165-$1,185/t FOB.
Within the Group II segment, prices for 150 neutrals were largely unchanged at $1,000-$1,020/t FOB Asia, while 500N was holding at $1,010-$1,030/t FOB Asia.
There was ongoing pressure on Group III pricing because of the expected increase in supply, but no adjustments were reported this week. Prices of 4 centiStoke and 6 cSt oils were assessed at $1,030-$1,070/t FOB Asia. The 8 cSt grade was heard at $1,010-$1,040/t FOB Asia.
On the shipping front, a few fresh inquiries emerged this week, with several parcels expected to be shipped from South Korea. A 1,000-metric ton lot was in discussions for Yeosu to Tianjin, China, for Sept. 25-29 lifting. A 1,700-ton cargo was on the table for Yeosu to Nantong, China, for end of September shipment. A 1,000-ton parcel was expected to be shipped from Yeosu to Maoming or Nansha, China, on Oct. 10-14. A 7,000-ton lot was quoted for Yeosu to Port Khalid/Sharjah, United Arab Emirates, for October dates. A 2,000-ton cargo was being worked on for Onsan to Tianjin for Oct. 4-8 shipment.
In Taiwan, a 3,000-4,000-ton cargo was expected to be moved from Mailiao to Mumbai, India, in end of October/early November.
In Japan, a 3,500-4,000-ton cargo was likely to be shipped from Kainan/Mizushima to Manila, Philippines and Ho Chi Minh, Vietnam, on Oct. 15-19. A 5,000-6,000-ton lot was in discussions for Mizushima and/or Mutsure to Manila, Hong Kong, and Singapore for Oct. 25-29 lifting.
Upstream, November ICE Brent Singapore futures were trading at $96.77 per barrel in afternoon trading on Sept. 29, compared to $96.88/bbl on Sept. 22.