Group II 500N Price Index Coming to China


SHANGHAI – With a price index for API Group II 150 neutral base oils under its belt, the Shanghai Lubricant Trade Association is now in discussion with China National Petroleum Corp. to develop an index for Group II 500N.

Wu Yuedi, the former president of the association who led the work to launch the earlier price index in 2018, mentioned the discussions at a side meeting during the China Inter Lubric event held here in late June.     

“We focus on Group II oils because they are highly marketable in China in large quantities, so it’s easier for us to develop a price index,” Wu said, adding that it is still too early to develop a price index for Group III oils because the tradable quantity is not large enough in China.

500N has wider applications than 150N in the Chinese market. “We hope to develop a price index to serve as a reference for 500N sellers and buyers, just like the 150N index does,” said Wang Lei, a director from CNPC’s lube research and development center in Dalian, Liaoning province.

At the meeting, representatives from Chinese refineries – including China National Offshore Oil Corp., Hainan Handi Sunshine and Zibo, Shandong province-based Shandong Huanghe Xin Cai Liao (Huanghe) – all agreed that it will be much easier for refiners to set a price with a recognized price index.

“The pricing issue has long been a headache for us because we don’t know how to set a well-balanced price, based on multiple factors such as crude oil and diesel prices, and market demand,” a representative from Huanghe said. “A price index will surely be helpful.”

Chinese refineries and buyers usually rely on foreign companies like ICIS or the Chinese data service provider SCI99 for pricing references. “But China needs to nurture several major domestic price index developers to more accurately track the [base oil] prices in the China market,” Wu said.

But there are some challenges to developing the index for 500N. For one thing, unlike 150N oils that are mostly supplied by Chinese refineries, much of the 500N base oils are imported, which could make the price index closer to the import price instead of the trading price in the China market. Second, the association leaned on the widely used ultra-low-sulfur diesel price as a reference when developing the 150N index, but there is no clear corollary with which to pair 500N. Wu said several analytical methods will be tried initially until they find the most appropriate reference.

While lube blenders in China currently buy 500N from overseas suppliers, domestic refinery representatives said the quantity has decreased in recent years thanks to the development of refining technologies that enabled local refineries to produce the heavy grade.

“Before, we were stuck with the lack of high quality paraffinic crude oils to produce 500N base oils, but with the advancement of technologies, we can produce 500N, even with lower quality crude oils,” said the Huanghe representative.

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