India, China Biggest Base Oil Importers


India, China Biggest Base Oil Importers
A diesel locomotive hauls an oil tanker train near Pune, India. India is the top base oil importer in Asia. © Dinesh Hukmani /

Two economic powerhouses, India and China, are the largest net base oil importers in the world, and an Argus Media analyst predicted recently that they will remain in that position in the foreseeable future.

South Korea, China and India are key markets in the Asia-Pacific region, which is the largest importing and producing region in the world. In the backdrop of China’s declined imports, India is absorbing the region’s surplus volumes, according to Tara Tang, base oil market analyst at Argus Media.

Global base oil production capacity is about 60 million tons per year, while global demand is expected to reach 30 million t/y.

“Clearly, we are in an oversupplied market which means buyers hold. Combined with that and the lower Chinese demand, regional Asian producers would have little alternative but to target India with increasingly competitive offers,” Tang told the Argus Global Base Oils conference held here last month.

More than half of the base oils exported from Asian-Pacific nations originate from South Korea, which was responsible for 54% of the total exports in the region between 2019 and 2023. Singapore was the second largest source, with 27%, followed by Japan, Taiwan, Thailand and China, with 10%, 6%, 2% and 1%, respectively.

Asia’s top importers of base oils are India and China, according to Argus. In 2023, India was responsible for 41% of imports by countries within the region, while China imported 32%. They were followed by Singapore with 12%, South Korea with 6%, Thailand and Japan with 4% each and Taiwan with 1%.

Tang also said that shrinking producing capacity in Japan and curbed exports from Thailand have created a structural shortage of Group I base oils in the region. The most prominent plant closures were Eneos’ plants in Negishi  and Wakayama, Japan, with capacities of 210,000 t/y and 360,000 t/y, respectively.

Chinese imports last year fell on persistently weak demand and competitively priced local supplies.

“On the other hand, in the backdrop of the diminishing Chinese imports, which last year fell to 1.8 million tons, India absorbed all of the regional surplus,’ Tang said. “Chinese products are plentiful and sell domestically at more competitive prices. South Korean and Taiwanese producers have no other choice but to divert their products to other markets, and that had to be India.”

For the period of January-November 2023, Indian base oil demand amounted to around 2 million tons, while its base oil production stood around 900,000 tons, consistently lagging the demand.

India is also an exporter, but robust domestic demand limits export volumes.

India currently has capacity to make 1.2 million t/y of base oil, but that amount is set to more than double in three years.

“Most of these [new] capacities will be Group II and Group III,” Tang said. “Upon their completion, we expect India to be more self-reliant, especially with its access to more competitively priced crude. As of now, India continues to be an unmatched net importer,” she said, adding that India currently exports approximately 2,000 tons per month.

As the world’s second-biggest economy, China has production capacity of about 13 million t/y. Of that amount, Group I comprises 19%, Group II 57% and Group III 24%, according to Argus.

“Chinese base oil imports have fallen, and this sends a strong signal of growing acceptance and reliance by local blenders of domestic supplies,” Tang said. “Especially so when lubricant demand is uncertain and buyers are increasingly price sensitive.”

India and China are making excellent progress growing domestic supply, “but it will take some time for their refiners to stabilize output and for the blenders to get used to their specifications.

India and China are important global producers and will continue to drive regional prices.

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