Lingering tight supply conditions and steady demand continue to support stable-to-firm base oil prices in Asia, but the situation could change in late October, as most plants will have resumed production after the completion of planned turnarounds.
The turnaround at Formosas Group II plant in Mailiao, Taiwan, may keep API Group II availability on the snug side through October, as it will take some time for the supplier to build inventories. The producer expects to resume production at the end of September, following a two-month maintenance shutdown, but will likely not be able to meet all of its long-term commitments until the plant is running at full rates and stocks have been replenished. No spot availability is anticipated until at least November, sources said.
Some suppliers lamented that base oil demand had slowed down in September compared with August, but others described requirements as steady. A Southeast Asian producer said that it had received several inquiries for new orders, probably as a result of recent shutdowns and a lack of spot availability from Northeast Asia. The supplier reiterated that, aside from pressure from the feedstock side, base oil prices were also firming because of the current tight supply/demand balance.
Meanwhile, activity in China started to wind down ahead of the autumn festival Sept. 19-21, as buyers preferred to keep inventories on the low side. Suppliers worried that demand would not pick up substantially until after the end of the National Day holidays celebrated in China during Oct. 1-5. Following the holiday period, buying interest may improve in the second half of October as finished lubricant producers ramp up production in preparation for the winter oil change season.
Furthermore, turnarounds at a couple of base oil facilities in China may drive buyers to seek more import volumes. Sinopec was heard to be planning to shut down its Group I plant in Maoming in October for around 50 days. Hainan Handys Group II facilities in Hainan remain shut down since July, and it could not be ascertained when the producer would restart operations.
While most buyers agreed that prices have remained fairly stable throughout September, some suppliers said that they had been able to push through increases between $5 and $20/ton, depending on the volumes and the cut. The heavy-vis cuts, which seem to be in higher demand, commanded steeper prices than their light-vis counterparts.
Domestic prices in China were heard to be on the rise, and trader sources said that Sinopec Shanghai Gaoqiao had lifted its offers of Group II 150N by $30/ton.
Imports of Russian origin have also edged up in China, with one supplier raising its export prices of low-vis Group I cuts by $10-$20/ton for September shipments.
An SN500 cargo of Southeast Asian origin was heard offered into China at around $1080-$1100/ton FOB NE Asia, but buyers deemed the price too high.
In the Singapore ex-tank segment, steeper offers for September were also heard, despite the fact that a major Singapore producer has maintained its prices unchanged.
However, suppliers admitted that buyers were resisting the increases as it has been difficult to pass the hikes on to the downstream segments, given uncertainties surrounding demand of finished products during the next few months.
In general terms, Group I cuts were assessed at $930-$970/t FOB Asia for SN150, SN500 at $1045-$1080/t FOB, and bright stock at $1145-$1190/t FOB. The SN150 assessment has been adjusted to more accurately reflect actual market transactions.
Group II material was mentioned at $1000-$1050/t FOB Northeast Asia for 150N, and at $1100-$1160/t FOB Northeast Asia for 500N.
Group III cuts were heard within a price range of $1040-$1080/t FOB Asia for 4 centiStoke and 6 cSt, reflecting a $20/t increase at the low end of the range. The 8 cSt cut was assessed at $1020-$1060/t FOB Asia.
On an ex-tank Singapore basis, Group I prices were pegged near $1000-$1090/t for SN150; SN500 material was assessed at $1090-$1190/t, and bright stock was heard at $1190-$1290/t. Prices varied according to volumes, producer and contract stipulations.
In related news, China raised the retail price of fuel by 85 to 90 yuan per ton, effective Sept. 14, on high crude prices in the international market, the National Development and Reform Commission (NDRC) said in a statement. The price of gasoline was lifted by 90 yuan per ton (or approximately U.S. $14.70/ton) and that of diesel by 85 yuan/ton ($13.88/ton). This is the third fuel price increase in two months.
On the shipping front, a 500-metric ton lot of base oil was likely to be shipped from Yosu or Ulsan to Taichung around Sept. 24-30. A 4,000 to 5,000-ton cargo of two or three base oil grades was being discussed to cover Mailiao to Mumbai around Oct. 15-20. A 3,000-ton parcel was being worked on for Hamriyah to Singapore for shipment on Sept. 22-28.
Upstream, November ICE Brent Singapore futures were trading at $109.60/bbl at the close of the Asian trading day on Sept. 17, compared with numbers at $113.03/bbl for October futures on Sept. 10.
Gabriela Wheeler, based in Japan, can be reached directly at Gabriela@LNGpublishing.com.