The extended shutdown at CPC-Shells API Group I light base oils unit in Taiwan, together with recent and ongoing turnarounds, continue to generate tight supply/demand conditions in Asia.
CPC-Shells light base oils plant completed a routine maintenance program in July, but the plant remains off-line due to economic factors. High feedstock costs against current prices for the light cuts are making it difficult to obtain reasonable margins, the supplier said, and the company is waiting for market conditions to improve to decide when to restart the unit. The heavy vis production line is running at full rates, the source added.
Also in Taiwan, Formosa shut down its Group II plant on July 29 for a two-month turnaround. The supplier has built inventories to cover some of its contractual obligations and domestic demand, but sources said that shipments to China could see a reduction of about 25 percent in August compared to July.
Meanwhile, demand was generally described as steady, despite the summer doldrums that typically affect the base oil market during July and August, together with the observance of Ramadan in many countries in the region. Buying interest was even characterized as robust for some of the cuts, resulting in tight conditions for the high-vis slates in particular.
Availability was expected to improve as the facilities that have been undergoing turnarounds resume production. S-Oil restarted its 1 million tons per year Group I/II facilities in Onsan on Aug. 1, following a month-long maintenance shutdown. The supplier expects to be able to ship slightly more volumes in the vicinity of 8,000 to 9,000 tons to China in August.
SK Lubricants is also expected to ship approximately 6,000 tons of Group III base oil to China in August. The producer does not expect to have much spot availability of Group II cuts next month as the reconfigured plant in Ulsan was not running at full rates, but expects to meet contractual commitments, market sources said.
In China, Sinopec expected to increase production of Group I and II cuts at several facilities in August, following capacity cutbacks in July, during what is typically considered a slow month for base oils.
A number of suppliers were seeking price increases for August shipments on the back of increased production costs and reduced product availability. A major Singapore refiner introduced increases between $20 and $40/ton on Aug. 1.
A Southeast Asia Group II/III supplier said that it had been able to raise prices by at least $20/ton on its Group III August shipments and had also sold some small Group II cargoes at a small increase. The supplier said that the Group III volumes had moved within the prevailing price range of $1000-$1060/t FOB Asia for 4 centiStoke, 6 cSt and 8 cSt grades. A second supplier said its cargoes were moving at much higher numbers because of their small size.
A Northeast Asia supplier said that it had implemented increases between $5 and $25/ton for shipments into China, with the light vis cuts, which are more readily available, seeing the lower increases and the heavy grades commanding the steeper hikes. The increases were pushed through because spot supply remains limited against requirements, the supplier underlined. A second Northeast Asia supplier concurred, adding that it had seen increases between $20 and $40/ton for shipments of 500N and bright stock.
On the other hand, blenders said that the proposed increases for August were higher than we can accept, and that it was very difficult to transfer the higher costs down the supply chain, as demand for finished products has been soft. An offer of 100N at $1060-1070/ton, for instance, was promptly rejected.
Prices in the Group I segment were mentioned at $970-$1000/t FOB Asia for solvent neutral 150, $1030-$1060/t FOB for SN500 and $1130-$1170/t FOB for bright stock.
A supplier said it had offered some SN500 cargoes at $1,100-$1,150/ton CFR China given the tight supply situation for this cut.
Group II material was assessed at $990-$1050/t FOB northeast Asia for 150N and at $1080-$1140/t FOB northeast Asia for 500N.
Group I ex-tank Singapore ranges were heard near $1030-$1100/ton for SN150, $1080-$1180/t for SN500 and $1180-$1290/t for bright stock. Prices varied according to volumes and other contract stipulations.
In India, sources said that state-owned producer Indian Oil Corporation had raised the domestic prices of its Group I SN500 and bright stock on Aug. 1, given rising feedstock costs and fluctuations of the rupee-U.S. dollar exchange rate. The producer has also increased the retail selling prices of gasoline and diesel.
On the shipping front, a limited number of inquiries emerged this week, with 1,000 metric tons expected to be shipped from Port Klang to Mumbai on a prompt basis, and 2,500-3,000 tons of SN500 likely to move from Sharjah to Chittagong, also on a prompt basis.
Upstream, September Brent settled in Asia at $108.96/bbl on Aug. 6, compared to numbers at $107.18/bbl on July 30.
Gabriela Wheeler, based in Japan, can be reached directly at gabriela@lngpublishing.com.