With the warmer temperatures, base oil demand has heated up in some countries, but it typically cools down in some others such as the key market China. The slowdown may coincide with a number of plant turnarounds that are scheduled to take place in Asia over the next few weeks and were expected to limit spot supply from a number of producers. Prices were generally stable, although a number of grades have softened on weakening buying interest.
Some of the market’s attention this week was focused on the annual Group of 7 summit taking place in Hiroshima, Japan, where leaders of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States, as well as the European Union, were expected to discuss current geopolitical issues and ways to maintain global economic stability. Economic uncertainties, inflation and a potential global recession have all impacted base oils and lubricants demand over the last several months.
In terms of base oil production, in Southeast, a large facility in Singapore was undergoing maintenance of some of its base oil trains from the end of April for approximately two months, affecting mostly API Group II supply. Due to recent maintenance and unplanned outages at a couple of Southeast Asian plants, availability of Group I base stocks has tightened, but this has coincided with slowing demand trends for these grades.
In Northeast Asia, a South Korean API Group II and Group III producer has scheduled an extended turnaround starting in late May, and spot availability was expected to be curbed as a result. A Japanese refiner was scheduled to start a two-month turnaround at its refinery this month, which was likely to affect Group I base oil output and limit availability from the producer. A second Japanese producer will be completing a turnaround between late April and June, which will affect Group II output. Later this year, the sole Taiwanese Group II producer was expected to shut down for maintenance in October. The producer was heard to have started to build inventories and has limited its spot sales. This also meant that there would be fewer volumes exported to China in the coming months.
An ongoing turnaround at a Group III facility in Europe was not expected to affect supply in the European Union or other regions for that matter, as the producer’s affiliate plant in South Korea was thought to be producing additional volumes to supplement the European market during the turnaround.
There were also turnarounds taking place at a couple of Chinese plants, and some units were running at reduced rates, but others have resumed production. Domestic output appeared to cover most of the country’s base oil requirements, with the exception perhaps of some of the heavy viscosity grades. While some of these cuts are regularly imported from regional producers, interest in imports has been fairly muted over the last few weeks, with observers noting that this may be due to sluggish demand from the industrial and automotive segments and falling domestic prices. Importers were also heard to be lowering offers in order to entice buyers. Group III grades may be an exception as prices were maintained due to tighter availability. A small 1,500-metric ton cargo was being quoted for shipment from Daesan, South Korea, to Zhuhai in June.
Automotive sales have been strong in China so far in 2023 compared to the previous year, when strict zero-COVID restrictions were in place. Nikkei Asia reported that sales of electric vehicles were on track to reach about a third of total auto purchases. Sales of all new vehicles are projected to grow 3% this year to 27.6 million units, according to the China Association of Automobile Manufacturers.
Elsewhere, there seemed to be keen interest in Group II grades, and several South Korean export transactions were being discussed. South Korean suppliers have tried to increase offer levels on expectations of strained supply of these grades, but buyers have resisted the higher indications. South Korean suppliers have also looked for opportunities outside of Asia, with a 7,000 to 9,000-ton cargo being discussed for shipment from South Korea to South America in late May or June.
In India, there appeared to be healthy buying appetite in certain segments of the market, but buyers were reluctant to commit to large volumes on hopes that prices would edge down. Given the arrival of several import cargoes from South Korea, the U.S. and the Middle East, buyers were comfortable delaying purchases as they felt there was enough supply to meet demand. Additionally, many consumers continued to rely heavily on base oils produced by local refiners. There was also talk about Iranian Group I material being offered into India.
A couple of large U.S. Group II cargoes were recently concluded to India, and additional volumes may become available following the restart of a key U.S. Group II plant after it completed a turnaround. A second Group II unit was expected to start maintenance in June, but following this program, there were expectations of increased Group II base oil output from both U.S. units as they have undergone a catalyst change. Several Asian cargoes were also in discussion for shipment to India, including a 5,000-ton lot for lifting in Ulsan or Yeosu, South Korea, to Mumbai or Haldia in early June. About 4,000 tons were on the table for shipment from Malacca, Malaysia, to Mumbai in late May or June. A 6,100-ton lot was quoted for shipment from the Arabian Gulf to West Coast and East Coast India in mid-May.
Spot base oil price assessments in Asia were stable to softer, with some grades showing small downward price adjustments on weakening supply and demand fundamentals. The price ranges portrayed below reflect discussions, bids and offers, as well as deals and published prices widely regarded as benchmarks for the region.
Ex-tank Singapore prices were steady from the previous week. Spot prices for the Group I solvent neutral 150 grade were unchanged at $920/t-$950/t, but the SN500 edged down by $10/t to $1,020/t-$1,060/t. Bright stock was hovering at $1,260/t-$1,300/t, all ex-tank Singapore.
Prices for the Group II 150 neutral were assessed at $1,010/t-$1,050/t, and the 500N at $1,040/t-$1,090/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was assessed down by $10/t at $750/t-$790/t, but the SN500 was steady at $870/t-$910/t. Bright stock prices were holding at $1,010/t-1,050/t, FOB Asia.
The Group II 150N was slightly lower by $10/t at $900/t-$940/t FOB Asia, and the 500N and 600N cuts were unchanged at $940/t-$980/t, FOB Asia.
In the Group III segment, prices were steady to softer from the previous week. The 4 cSt at the high end of the range was down by $10/t at $1,520-1,550/t, while the 6 cSt was assessed steady at $1,490/t-$1,530/t. The 8 cSt grade edged down by $10/t to $1,110-1,150/t, FOB Asia, for fully approved product.
Upstream, crude oil and feedstock prices remained volatile, with numbers climbing last week and falling again earlier this week on less optimistic Chinese economic data. However, futures jumped by about $2 per barrel on Wednesday on optimism about oil demand and U.S. debt ceiling negotiations, which offset expectations of a potential global oversupply.
On May 18, Brent July futures were trading at $76.55 per barrel on the London-based ICE Futures Europe exchange, from $75.26/bbl on May 11.
Dubai front month crude oil (Platts) financial futures for June settled at $75.18 per barrel on the CME on May 17, at the same level of $75.18/bbl on May 10.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
Lubes’n’Greases shall not be liable for commercial decisions based on the contents of this report.
Archived base oil price reports can be found through this link: https://www.lubesngreases.com/category/base-stocks/other/base-oil-pricing-report/
Historic and current base oil pricing data are available for purchase in Excel format.