Markets in Asia were gradually returning to business and were bracing for the potentially eventful months ahead as United States president-elect Donald Trump threatened steep tariffs and upend current trade patterns. Asian governments have decided to strengthen regional ties and were holding bilateral country meetings, with a Japanese representative visiting China this week. China continues to deal with economic uncertainties and has started to implement new economic policies, while India remains the world’s fastest growing major economy, with a buoyant manufacturing sector, but also many challenges such as the need to reduce extreme poverty and high unemployment.
Also in India, the Hindu festival of Maha Kumbh Mela – a giant celebration that takes place once every 12 years – kicked off on January 13 in the northern state of Uttar Pradesh. The festival will last until February 26 and was expected to attract more than 400 million participants, drawing attention away from agricultural, manufacturing and other economic activities.
Base oil market movements in India have been somewhat dampened by the fact that many consumers have adequate inventories to cover current needs and were hesitant to purchase large cargoes due to price uncertainty. The availability of competitively priced domestic material also reduced the urgency to secure imported cargoes, despite the fact that several shipments from Southeast Asia, South Korea, the Middle East and the U.S. were expected to reach Indian shores over the next few weeks.
A 5,000-metric ton parcel was expected to be shipped from Singapore to Mumbai December 20-25. About 4,000-tons were lifted in Ulsan, South Korea, to Mumbai in the first half of December. A 15,000-ton shipment was expected to be lifted in Yanbu, Saudi Arabia, for Mumbai in mid December, with a second 4,000-ton lot also likely to cover the same route. About 15,000-20,000 tons were booked for lifting in Ulsan to Mumbai and Hazira in mid December. A 20,000-ton lot was quoted for shipment from Ulsan to Mumbai and Jawaharlal Nehru Port Authority (JNPT) between December 10-15. A 3,000-ton parcel was also mentioned for shipment from Kuwait to JNPT in mid December. About 13,000-18,000 tons were quoted for shipment from Yanbu to Mumbai January 10-15.
U.S. volumes were likely to be less abundant than in previous years at this time in India due to the unexpected shutdown of a Group II plant in the U.S. last November, which had curtailed spot availability, and the upcoming turnaround at another plant in March as its operator was anticipated to start building inventories ahead of the outage.
Base oil prices were generally reported as stable to soft in India, with domestic producers having adjusted down some of its light viscosity grades, and imports of Group I cuts also slipping by U.S.$5 per metric ton on a CFR India basis from the previous week. A weaker Indian rupee against the dollar also impacted price ideas for imports, encouraging buyers to look for domestic supplies as these were deemed more competitive.
Prices of Group II cuts were stable as availability was more strained and Northeast Asian suppliers were not under pressure to place shipments. Buyers were also confident that there would be ample imports available to cover their requirements. With future lubricant demand still difficult to assess, blenders were cautious about how much product to acquire. These conditions also seemed to apply to Group III cuts, which were generally expected to be plentiful, both from Asian and Middle East sources.
Several base oil plants in Asia were preparing for turnarounds, which might lead to reduced availability of certain grades and place upward pressure on prices moving forward.
Within the Group I segment, the expected permanent closure of PetroChina’s Dalian Petrochemical Group I plant in late 2024 tightened the supply/demand balance. At the same time, the Group I expansion at PetroChina’s Fushun plant–which reportedly brought additional Group I capacity of 330,000 metric tons per year on stream in Q3 2024 – helped relieve some of the tightness.
Thai Group I cargoes often make their way to China, but the IRPC Group I plant in Thailand was heard to be preparing for turnaround in the second quarter. The turnaround was originally reported to have been scheduled for the first quarter of 2025, but it will not be taking place until May. While the producer was likely to build inventories ahead of the shutdown to meet term commitments, it may not be able to offer spot shipments, and the producer will also likely prioritize domestic commitments.
There were also reports that the Pertamina Group I plant in Cilacap, Indonesia, would be undergoing maintenance work this month and reduce output. This might exacerbate an already tight supply and demand scenario in the region.
Another country that has seen recent Group I closures and consolidations is Japan. Two Eneos plants were permanently shuttered over the last three years. The Idemitsu Kosan’s Group I unit in Chiba remained offline for an extended period starting in mid 2024 because of a fire at the lubricating oil production facility, but was expected to have been restarted at the end of December. A Cosmo Oil unit in Yokkaichi, Japan, underwent an extended maintenance program, which began in late September and was to be completed by the end of 2024. Eneos also plans to complete maintenance at its Mizushima and Kainan plants this year.
Within the Group II segment, South Korean producer GS Caltex was reported to have scheduled a turnaround at its Group II/III plant in Yeosu and has started to build inventories to cover term commitments during the outage. The turnaround was anticipated to start in early March and be completed by mid April, likely tightening spot availability in Asia in the first quarter.
Additionally, there were reports that the Hyundai Oilbank/Shell Group II base oil unit in Daesan, South Korea, had run at reduced rates for several days due to a fire at the refinery in late December. Operating rates were expected to be increased in early January.
In China, the CNOCC Group II plant in Huizhou was heard to have resumed production the first week of January after an unexpected shutdown in late 2024, but high-viscosity base oil grades were generally deemed tight in China.
Despite the recent supply disruptions and upcoming Group II turnarounds, Group II light grades were heard to be plentiful in Asia, and there were reports of several Taiwanese Group II cargoes having changed hands over the last few weeks. The sole Taiwanese Group II producer, Formosa Petrochemical, used to ship larger quantities to China, but has reduced its volumes due to the imposition of tariffs on refined products by the Chinese government last year.
Formosa was anticipated to run at top rates until the second half of the year, when the company plans to perform maintenance on the Group II unit. A 2,000-ton base oils cargo was mentioned for shipment from Mailiao, Taiwan, to Hamriyah, United Arab Emirates, in early January. A 1,500-ton parcel was discussed for lifting in Mailiao to Singapore in the second half of January. About 8,000-12,000 tons were quoted for shipment from Mailiao to West Coast India the first week of January.
Chinese demand for base oil imports has been subdued as domestic production has increased over the years, reducing the country’s reliance on foreign products. Nevertheless, a number of cargoes were expected to be shipped to China this month, including a 1,000-metric ton lot loading in Onsan, South Korea, for Zhanjiagang, a 500-ton parcel also loading in Onsan for Zhenjiang, and a 2,000-ton cargo expected to be shipped from Onsan to Jingjiang in the first half of January. A 3,000-ton cargo was also mentioned for shipment from Daesan, South Korea, to Nantong in January, with a second 8,000-ton lot quoted to cover the same route and lifting between December 20 and January 10.
The approach of the Lunar New Year celebration at the end of January also dampened Chinese demand, as the window to acquire raw materials and manufacture finished products before the week-long holiday was closing. Many manufacturing sites and logistics companies close their doors during the New Year holiday, and port operations may also see disruptions.
Fresh reports about the state of the Chinese automotive industry emerged on Monday. China’s Association of Automobile Manufacturers reported that the auto sector had hit a new milestone in 2024, with production and sales each exceeding 31 million units, according to Xinhua, the official state news agency. Total auto output reached 31.282 million units last year – up 3.7% compared with 2023 – while sales rose 4.5% year on year to top 31.436 million units. New energy vehicles accounted for approximately 40% of total sales.
A strong automotive sector should drive increased demand for premium base oils, market sources said. At the same time, the agricultural, marine, railway and heavy-duty segments require significant amounts of Group I grades, with bright stock still expected to play a major role.
Prices
Crude oil futures surged on Monday as new sanctions on Russian crude oil shipments and tankers were expected to curb supply to China and India. On Friday, the U.S. Treasury imposed sanctions on Russian oil producers Gazprom Neft and Surgutneftegas, as well as on 183 vessels that have shipped Russian oil, in hopes of cutting the revenues Moscow has used to fund its war on Ukraine, Reuters reported. These measures will likely push Chinese and Indian refiners to source more oil from the Middle East, Africa and the Americas, boosting prices and freight costs, analysts said.
On January 13, Brent March 2025 futures were trading at $81.33 per barrel on the London-based ICE Futures Europe exchange, from $76.10/bbl on January 6.
Dubai front month crude oil (Platts) financial futures for February 2025 settled at $78.85 per barrel on the CME on January 10, compared to $75.99/bbl on January 3.
Spot base oil prices were assessed as steady to soft, but trading remained muted, with lighter grades exposed to downward pressure because of more plentiful supplies.
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 to lower from a week ago. Group I solvent neutral 150 was assessed down by $10/t at $760-800/t, but SN500 was unchanged at $1,030-1,070/t. Bright stock prices were firm at $1,320-1,360/t, all ex-tank Singapore, on tight regional availability.
Prices for the Group II 150 neutral were hovering at $840-880/t, and the 500N was unchanged at $1,060-1,100/t, ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was assessed down by $10/t at $630-670/t, but SN500 was holding at $910-950/t. Bright stock prices were hovering at $1,120-1,160/t, FOB Asia on snug supply.
Group II 150N was steady at $690-730/t FOB Asia, while 500N was unchanged at $920-970/t FOB Asia.
In the Group III segment, 4 cSt was slightly lower by $10/t due to ample supplies at $1,020-1,060/t, and 6 cSt was similarly assessed down by $10/t at $1,050-1,090/t. The 8 cSt cut was unchanged from a week ago at $950-990/t.
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.