Australia’s lubricant market is feeling the impact of supply chain disruptions linked to the Middle East conflict, which has sent global base oil prices soaring. While supply remains available, industry participants say rising costs pose a more immediate challenge than outright shortages, according to reporting by The Guardian Australia.
API Group II base oil prices in Asia have more than doubled since March, while Iranian attacks early in the conflict have temporarily sidelined around one-fifth of global API Group III production capacity in Qatar, Abu Dhabi and Bahrain.
Australia consumes between 300,000 and 400,000 metric tons of base oils annually, according to ICIS. Domestic rerefining provides about 100,000 tons of capacity at full utilization, leaving the country heavily reliant on imports to bridge the gap.
The lubricant market, estimated at 500 million to 700 million liters per year, supports key export sectors including mining and agriculture, making supply security a strategic concern.
“Australia is definitely not in a strong position,” Michael Connolly, ICIS head of refining and base oils analytics, told Lube Report.
Australia has no virgin base oil production capacity and depends largely on imports from Singapore, South Korea and the Middle East. Singapore supplies roughly half of the country’s imports, while South Korea accounts for about one-fifth, Connolly said.
The closure of the Kurnell refinery in 2014 ended domestic Group I production. Even if it had remained in operation, Australia would still rely on imports for its Group II and Group III requirements. Its remaining refineries lack the hydrocracking units needed to produce those grades. Any future domestic base oil production would also depend on imported crude oil.
“Given the surplus refining capacity in Asia, it is generally just as economical to import product directly,” Connolly said. “Either way, Australia remains exposed to global supply issues, as demonstrated in the current market.”