Singapore — China is increasing exports of API Group II and Group III base oils into Asian markets after a decade of capacity growth increased domestic supply, according to speakers at an industry conference in June. Shipments have grown over the past five years as refiners expanded sales into Southeast Asia and India. China remains a net importer of base oils, although its reliance on overseas Group II and Group III supplies has declined as local production increased.
China accounted for 41% of Asia’s base oil production in 2025, according to ICIS Senior Analyst Whitney Shi. South Korea accounted for 19%, Singapore 10% and India 6%. Much of China’s position followed new Group II and Group III plants entering production during the past decade. Group II output slipped in 2025 as domestic units reduced operating rates. Higher demand from lubricant manufacturers encouraged Group III producers to run their plants harder.
Exports climbed 26.8% in 2025 to 217,000 metric tons. Singapore received 64% of the total, with shipments also going to India, the United Arab Emirates and Malaysia. During the first four months of 2026, exports declined 4% from the same period a year earlier. Singapore and Malaysia were the largest destinations during that period. Shi expects volumes to increase during 2026 as Chinese suppliers sell more Group II and Group III base oils into Southeast Asia.
Sinopec Maoming and Gaoqiao Petrochemical are among the main exporters. CNOOC and independent refiners have also shipped Group II base oils into Southeast Asia when export margins offered better returns. Longrun Kaida Senior Manager Luyuan Zhang described China as moving “from a large importer to an indispensable global supply hub.”
Imports fell 4.4% in 2025 to 1.469 million tons, according to Zhang, who put import dependency at 14% based on apparent demand of 10.37 million tons. High-end polyalphaolefins and esters retained import dependency of about 30%. Shi said Chinese lubricant manufacturers have increasingly chosen domestic Group II and Group III base oils as product quality improved and local material became more competitive on price.
South Korea remained China’s main source of imported Group II and Group III base oils during 2024 and 2025, though volumes continued to decline as domestic products found more applications. Asian refiners also shipped less material to China amid excess Group II supply. Singapore moved more Group II into China during the fourth quarter of 2025 following the startup of ExxonMobil’s new Group II unit.
China’s apparent base oil consumption fell to 6.3 milliontons in 2025, Shi said. Improvements in base oil quality have helped extend intervals between oil changes, reducing consumption among downstream users. Excess supply has brought new Group II capacity projects and startups to a halt. Independent refiners account for about 58% of Group II capacity, which remains the largest base oil category in the country.
The Middle East conflict changed market conditions in March after the closure of the Strait of Hormuz disrupted crude flows. Crude oil prices reached about $110 per barrel, roughly 60% above levels at the end of February. Group I and Group II base oil prices doubled while Group III prices tripled, according to Shi.
Chinese producers raised base oil operating rates as available crude inventories and stronger production margins supported additional output. Some refiners postponed maintenance. Importers faced higher costs and some suspended term purchases as imported material generated losses. Global lubricant companies continued taking contracted volumes and bought additional material on the spot market. Local lubricant producers began cutting spot purchases in early May as higher input costs became difficult to pass to customers.
Import margins remained negative from late March through late May, with losses exceeding $300 per ton at their peak. Lower-priced domestic Group II N150 replaced imported material at many lubricant manufacturers. Traders responded by sending some imported N150 cargoes to Southeast Asia.
The same market disruption created an export opportunity for Chinese Group II N150. Export margins exceeded $400 per ton in early May after the arbitrage window opened in late March. Chinese refiners began shipping N150 to Southeast Asia and India during April. “Continuous exports are expected,” Shi said.
Refiners elsewhere in Asia initially reduced base oil operating rates to between 60% and 70% as crude supplies tightened during the Iran crisis. Spot availability declined and term allocations were reduced as prices increased. Intermittent shipping through the Strait of Hormuz later improved crude availability, allowing refiners to raise operating rates close to capacity by late May. Spot supplies subsequently resumed for deep-sea destinations where export economics had improved.
China had about 30 major base oil producers with combined capacity of 16.72 million tons in 2025, according to Zhang. Group II+ and Group III increased their shares of capacity during the past five years as new plants entered production. Group I lost share as investment slowed and some existing capacity sat idle. China’s average base oil capacity growth slowed to less than 5% between 2022 and 2026.
Asian base oil capacity is expected to exceed 35 million tons in 2026, an increase of more than 2% from 2025, according to Shi. New capacity scheduled for this year includes projects in China, India and Saudi Arabia.