The Asian market appears to be slowly winding down ahead of the year-end holidays, with suppliers eager to find a home for their products and buyers showing purchasing restraint as they strive to finish the year with low inventories.
A number of producers said they had been able to finalize business through the end of December and did not have extra tonnage to offer for spot transactions. Others are still in the midst of negotiations for December shipments and expected to conclude deals by the end of the month.
Additional product from the S-Oil API Group II/III expansion in Onsan, South Korea, is expected to be shipped over the next few weeks, as work on the revamped plant has been completed and operations are back to normal, a company source said this week.
The additional product has already been sold to spot and contract customers, the source added, and the producer does not have any surplus material as the company had conducted a turnaround on its Group II plant last August and was still rebuilding inventories following the expansion project.
A second Northeast Asian supplier, whose plant had also completed a turnaround in October and currently reports a sold-out position until January, was able to sell several cargoes into China at a premium between $10-20 per metric ton, depending on the size of the cargo, as some buyers had run down inventories and were willing to pay higher prices to secure the product, a company source said.
Another supplier concurred that demand in China had been better than anticipated, despite the slowdown typically seen at the end of the year and the startup of projects like S-Oils in Korea and Panjin Northern Asphalts in China, which had had little impact on the market so far. Panjin commenced production at its new 400,000 ton per year Group II plant at Panjin earlier this month, sources said.
Prices in China have been fairly steady, particularly for some of the low-vis cuts that had been under downward pressure earlier in the year. Sources said that demand for these cuts had improved and availability had tightened, supporting prices.
A Taiwanese Group II producer said it had received several calls from Chinese buyers looking for product as this segment of the market remained snug, but the supplier could not offer any spot availability until January.
Other cuts remain under downward pressure given growing supply and lackluster requirements over the last few weeks, especially in other parts of Asia.
Suppliers who are currently negotiating December shipments said that sentiment always plays a big role in negotiations with customers, and there is widespread concern that prices would fall in the next few weeks, as buyers perceive the market to be oversupplied.
This might be true in Southeast Asia, a supplier said, but in China, prices have been holding fairly stable as buyers appeared quite anxious to secure cargoes, particularly of Group II cuts.
The supplier conjectured that this situation was partly the result of the Chinese governments mid-year announcement of stricter controls on lubricant production, requiring the use of better quality base oils.
While Group II demand was generally holding, requirements for Group III have dwindled amid plentiful supplies. A Southeast Asia producer was heard to have lowered its Group III spot prices into China by $10/ton for December cargoes to stimulate sales, market sources said.
In the meantime, a majority of base oil prices were assessed as largely stable, with only Group III prices undergoing a slight revision to better reflect current transactions.
Group I prices were heard unchanged at $930-$970/t FOB Asia for SN150 and at $1050-$1080/t FOB for SN500. Bright stock was mentioned at $1140-$1180/t FOB.
Group II material was steady at $980-$1030/t FOB Asia for 150N, and $1100-$1150/t FOB Asia for 500N.
Group III prices were stable to slightly firmer, with numbers heard at $1030-$1080/t FOB Asia for 4 cSt and 6 cSt, and $1010-$1060/t FOB Asia for the 8 cSt cut, showing a $10/ton upward revision at the high end of both ranges to reflect deals by a Southeast Asia supplier concluded at $1,060-1,080/ton FOB. However, the producer has lowered its offers to China by $10/ton for December shipments as mentioned above.
On an ex-tank Singapore basis, Group I prices were assessed at $990-$1080/t for SN150; SN500 was gauged at $1090-$1190/t, and bright stock at $1190-$1290/t. Prices varied according to volumes, producer and contract stipulations.
On the shipping front, discussions picked up the pace from last week and vessel space is tightening up, sources said. A 1,000-metric ton cargo of 600N was being discussed from Ulsan or Yosu to Taichung for arrival between Nov. 20-30. A 4,000-ton cargo was likely to be shipped from Ulsan to Tianjin for loading during Dec. 1-10. A 3,000-ton lot was looking to be moved from Yosu to Taicang between Nov. 18-22, while 1,000 tons were also expected to be shipped from Yosu to Nantong for the same lifting dates. A large 6,700-ton parcel was being worked on from Hong Kong to Zhuhai, Zhapu, Ningbo and Tianjin at the end of Nov. or in early Dec. A 1,000-ton parcel of two base oil grades was expected to be shipped from Onsan to JNPT, India, during Dec. 1-14, with a second 1,950-ton cargo on the table from the same origin to Tianjin during Dec. 8-12.
Upstream, January 2014 ICE Brent Singapore futures were trading at $108.06 per barrel during the Asian trading day on Nov. 19, compared with numbers at $106.22 per barrel for December futures on Nov. 12.
Gabriela Wheeler, based in Japan, can be reached directly atGabriela@LNGpublishing.com.