API Group II exports from the United States will shift from Europe to South America and Africa over the next five years as the market adjusts to new production capacity within Europe, according to an industry consultant.
Speaking at the ICIS World Base Oils & Lubricants Conference in London on Feb. 20, ICIS Vice President for Consulting Stefano Zehnder said those adjustments are a natural outcome after the 2019 opening of an ExxonMobil Group II plant in Rotterdam, the regions first large source of that grade of base stocks.
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Traditional trade routes will re-size to evolve with capacity and demand trends, he said.
Zehnder also predicted decreases in Group II flows from Northeast Asia to Southeast Asia and in the opposite direction.
Base oils is increasingly a global market, and the United States is both the largest producer and largest exporter of Group II oils. ICIS estimates that 42 percent of all Group II exports originated in North America in 2018, most of that amount from the United States. In 2018, the largest share of North American exports went to Europe, while a smaller portion went to Latin America – including U.S. exports to Mexico – and a still smaller portion to South Asia.
Twenty-seven percent of global Group II exports originated in Northeast Asia – mostly South Korea – and nearly all of that volume went to Southeast and South Asia, ICIS estimates. Southeast Asia was responsible for 19 percent of Group II exports, and most of that flow was to Europe and Northeast Asia, principally China.
ExxonMobil’s Rotterdam plant has capacity to make 1 million metric tons per year of Group II, which is well over half of the regions current demand for that grade, so it will take some market share from existing importers, Zehnder said. Most of the volume nudged out of Europe will be redirected to South America, where Group II demand is rising, ICIS forecasts. Africa’s demand for that API grade is also increasing, and the firm expects a smaller amount to be diverted there.
By 2025 ICIS predicts that South America will become the biggest destination for North American Group II and that exports to Africa will be roughly on the order of Europe.